Nexant Complete Report template · coal reserves in Western China. Spurred by technological advances and cheap coal from Inner Mongolia, China invested heavily in coal-to-chemical

NexantThinkingTM

Coal to Chemicals - Viable in a Low Oil-Price Environment?

Brochure May 2015

Special Reports

NexantThinkingTM

Special Reports

Coal to Chemicals - Viable in a Low Oil-Price Environment?

Brochure May 2015

A50801.010.01 Special Reports

www.nexantthinking.com

This Report was prepared by Nexant, Inc. (“Nexant”) and is part of the NexantThinking™ suite. Except where specifically stated otherwise in this

Report, the information contained herein is prepared on the basis of information that is publicly available, and contains no confidential third party

technical information to the best knowledge of Nexant. Aforesaid information has not been independently verified or otherwise examined to determine

its accuracy, completeness or financial feasibility. Neither Nexant, Subscriber nor any person acting on behalf of either assumes any liabilities with

respect to the use of or for damages resulting from the use of any information contained in this Report. Nexant does not represent or warrant that any

assumed conditions will come to pass.

The Report is submitted on the understanding that the Subscriber will maintain the contents confidential except for the Subscriber’s internal use. The

Report should not be reproduced, distributed or used without first obtaining prior written consent by Nexant. Each Subscriber agrees to use reasonable

effort to protect the confidential nature of the Report.

Copyright © by Nexant Inc. 2015. All rights reserved.


Special Reports - Brochure Coal to Chemicals - Viable in a Low Oil-Price Environment?

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Contents

Section Page

1 Introduction ............................................................................................................................. 1

1.1 OVERVIEW ............................................................................................................... 1

1.2 BACKGROUND ......................................................................................................... 3

1.3 OBJECTIVE OF THIS STUDY .................................................................................. 5

2 Scope of Work ........................................................................................................................ 6

2.1 OVERVIEW ............................................................................................................... 6

2.1.1 Comparative Economics - Coal versus Naphtha Feedstock........................ 6

2.1.2 Gasification Technologies ............................................................................ 7

2.1.3 Product Technologies................................................................................... 8

2.1.4 Location ........................................................................................................ 8

2.1.5 Year .............................................................................................................. 8

2.1.6 Strategic Considerations .............................................................................. 8

3 Table of Contents ................................................................................................................... 10

4 Approach ................................................................................................................................ 15

5 Qualifications .......................................................................................................................... 16

5.1 GENERAL ................................................................................................................. 16

5.2 SUMMARY OF PROJECTS RELATED TO COAL-TO-CHEMICALS....................... 18

6 Contact Information ................................................................................................................ 21

Figure Page

1.1 Spread of Coal to Olefins vs Crude Oil to Olefins in January 2014 and 2015 ....................... 2

1.2 Net Capital Charges - Spread of Coal to Olefins vs Crude Oil to Olefins in January 2014

and 2015................................................................................................................................. 3

1.3 Chemical Production Potential from Coal .............................................................................. 4

5.1 Nexant Office Locations ......................................................................................................... 16

Table Page

1.1 China MTO/MTP Projects ...................................................................................................... 4

2.1 Polypropylene Cost of Production Estimate ........................................................................... 7



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Section 1 Introduction

1.1 OVERVIEW

Until recently, coal to chemicals was seen as a promising route to diversify China’s slate of chemical

feedstocks to reduce crude oil import reliance and as a way of creating jobs and monetizing abundant

coal reserves in Western China. Spurred by technological advances and cheap coal from Inner

Mongolia, China invested heavily in coal-to-chemical projects between 2003 and 2014. For China, coal

offered a more realistic and readily available starting point to chemicals than the alternative of importing

LNG, LPG, naphtha or crude oil.

The dramatic fall in crude oil prices in late 2014 jolted the global economy and unequivocally altered

investment views in energy and petrochemical markets. Naphtha based petrochemical participants found

new life from a less expensive feedstock, while North American shale oil and gas producers struggled

with high drilling and logistic costs. Similarly in China, coal to chemicals producers found their margins

substantially narrowed to the point of questioning the viability of coal as a starting point for

petrochemicals. Policy shifts by the Chinese government over the past two years, including new

environmental taxes, increased financial charges, new technical guidelines, and policies resulting from a

limited water supply further increase the challenges for the coal to chemicals industry in a low oil-price

world.

The first step in any coal to chemical production technology is using coal to produce synthetic or

synthesis gas (syngas). In early 2014, with Brent crude above $100 per barrel and coal in Mongolia at

$42 per ton, the spread between naphtha feedstock and coal was $850 per ton of olefins. The collapse of

crude oil narrowed the spread significantly to $134 per ton of olefins by early 2015, although coal still

remains a cheaper feedstock route for Chinese olefins production on a cash basis as illustrated in Figure

1.1. While almost all of Chinese coal-to-chemicals (CTO/MTO) projects remain committed as producers

have spent considerable time and resources preparing for these massive olefins and derivatives plants,

there were a few cancellations such as the million tons per annum olefins project1 in Xinjiang, China.

Even if oil prices recover, the decline will have left an imprint of greater volatility and downside risk

recognition.

1 Xinjiang Guanghui Coal Chemical Industry



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Figure 1.1 Spread of Coal to Olefins vs Crude Oil to Olefins in January 2014 and 2015 (U.S. dollars per ton)

Source: Nexant Analysis

From Figure 1.1, it is evident that coal to olefins conversion consumes twice as much utilities and has

fifteen times the environmental costs as the crude oil feedstock route. Furthermore, Chinese coal

reserves are largely in the Inner Mongolia interior, thus the transportation cost to coastal demand centers

negatively affects the economics. Essentially, the spread between coal and crude oil to olefins production

has narrowed significantly, benefiting European and North American producers, and reducing the

attractiveness of coal to chemical projects in China.

As seen in Figure 1.2, the spread between coal and crude oil to olefins production has narrowed further

when capital costs are included. Consideration of increased financing charges due to policy shifts will

result in additional narrowing of this spread.

0

200

400

600

800

1000

1200

1400

1600

Jan-14 Jan-14 Jan-15 Jan-15

Eastern ChinaNaphtha Cracker

Mine-mouth China(from MTO)



Net Raw Materials Utilities Fixed Costs Environmental Costs Transportation

XLS:

$850 (2014)

$134(2015)



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Figure 1.2 Net Capital Charges - Spread of Coal to Olefins versus Crude Oil to Olefins in January 2014 and 2015

(U.S. dollars per ton)

1.2 BACKGROUND

Coal gasification is a well-proven technology with a long history of applications ranging from the earliest

uses of coal gas for heating and lighting in urban areas (“town gas”), to the production of synthetic fuels

such as liquid hydrocarbons and synthetic natural gas (SNG) chemicals and most recently to large-scale

IGCC (integrated gasification combined cycle) power generation.

Essentially all of the important first-stage organic petrochemicals were made from coal from the 1900s to

the 1930s. The coke oven industry provided by-product ammonia, ammonium sulfate, benzene, toluene

and phenols. In the fuels and chemicals sector, success was achieved in producing straight chain

hydrocarbons, alcohols, and other organic chemicals from synthesis gas, as exemplified by the work of

Bergius, Fischer and Tropsch and others.

The chemical industry switched almost completely to natural gas and petroleum liquids between 1940

and 1965, driven by their low cost and ready availability. As an example, DuPont started to make

methanol from coal in relatively large amounts in Belle, West Virginia, but quickly shut this unit down

when inexpensive natural gas became available during the early 1950s. The use of coal for the

production of organic chemicals diminished greatly over time as a consequence of both its high capital

cost and environmental concerns regarding by-products produced and the effects of coal

mining/extraction.

China has exhibited increased activity in coal-to-chemicals, initially in coal to ammonia/urea and coal to

calcium carbide-PVC projects. Subsequently, coal-to-methanol and other chemicals (BDO and

derivatives, etc.) became important in China. Methanol plants have become increasingly large, and when

coupled with modern methanol to olefins (MTO)/methanol to propylene (MTP) technology, these plants

were expected to provide China with the opportunity to develop an alternative coal-based olefin/polyolefin

industry. Approximately 22 coal to olefin and methanol to olefin (CTO/MTO) projects have started up or

are underway as of Q1 2015, estimated to add 6.6 million tons of ethylene and 7.9 million tons of

propylene capacity per year between 2015 and 2020 as shown in Table 1.1.

0

200

400

600

800

1000

1200

1400

1600

Jan-14 Jan-14 Jan-15 Jan-15





Net Raw Materials Utilities Fixed Costs

Environmental Costs Transportation DepreciationXLS:

$76 (2015)

$800 (2014)



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Table 1.1 China MTO/MTP Projects

Company Ethylene Propylene Start-up

Shandong Yangmei Hengtong Chemicals 295 2014

Sinochem Yiye Energy Investment 800 2014

Pucheng Clean Energy Chemical 300 400 2014

Wilson Clean Energy 135 160 2015 or 2016

(Construction

Underway)

Jiutai Energy (Zhungeer) 300 300 2015

Zhengda (Changzhou) New Material 500 500 Q1 2015

Zhejiang Xingxing New Energy 600 Q1 2015

Shanxi Coking 300 300 Q2 2015

Xinjiang Guanghui Coal Chemical Industry 1,000 Cancelled

(2015)

China Coal Energy Yili Coal Electrochemical 300 2016

Jiangsu Sailboat Petrochemical Chemicals 833 2016

Source: ICIS Chemical Business 2015

The list of potential chemicals that can be derived from coal is the same as from gas and petroleum,

given that coal provides both the hydrogen and carbon atoms needed for petrochemical production. A

roadmap of key chemicals from coal is shown in Figure 1.2.

Figure 1.3 Chemical Production Potential from Coal

Methyl Acetate Acetic Anhydride

Power & Steam

Acetate Esters

Fischer-

Tropsch

Liquids

NaphthaAcetic Acid

Waxes

Diesel

Car Fuel

Alpha Olefins

Formaldehyde

Coal/Petcoke Gasification Synthesis Gas Methanol

Town Gas

Acrylonitrile

Hydrogenation

Processes

Ammonium Nitrate

H2

Fuel Cells

Dimethyl Ether

Ammonia

Urea

Distrib.

Co-Generation

Ethylene &

Propylene

Urea/

Ammonium

Nitrate

Ketene

VAM PVA

Diketene &

Derivatives

CO

CO Chemicals

Oxo Chemicals

Acrylic Acid/

Acrylates

Polyolefins

Alpha Olefins

Source: “Eastman Gasification Overview”, Eastman Gasification Services Company, July 19, 2004

(with modifications and additions)


Power & Steam

Acetate Esters

Fischer-

Tropsch

Liquids

NaphthaAcetic Acid

Waxes

Diesel

Car Fuel

Alpha Olefins

Formaldehyde


Town Gas

Acrylonitrile

Hydrogenation

Processes

Ammonium Nitrate

H2

Fuel Cells

Dimethyl Ether

Ammonia

Urea

Distrib.

Co-Generation

Ethylene &

Propylene

Urea/

Ammonium

Nitrate

Ketene

VAM PVA

Diketene &

Derivatives

CO

CO Chemicals

Oxo Chemicals

Acrylic Acid/

Acrylates

Polyolefins

Alpha Olefins


Power & Steam

Acetate Esters

Fischer-

Tropsch

Liquids

NaphthaAcetic Acid

Waxes

Diesel

Car Fuel

Alpha Olefins

Formaldehyde


Town Gas

Acrylonitrile

Hydrogenation

Processes

Ammonium Nitrate

H2

Fuel Cells

Dimethyl Ether

Ammonia

Urea

Distrib.

Co-Generation

Ethylene &

Propylene

Urea/

Ammonium

Nitrate

Ketene

VAM PVA

Diketene &

Derivatives

CO

CO Chemicals

Oxo Chemicals

Acrylic Acid/

Acrylates

Polyolefins

Alpha Olefins

Source: “Eastman Gasification Overview”, Eastman Gasification Services Company, July 19, 2004

(with modifications and additions)

Q205_71440.002.03.vsd/Figure 1.5



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1.3 OBJECTIVE OF THIS STUDY

The study will give subscribers a solid grasp of the state of development of coal to chemicals

technologies, including an update on the status of such technologies as currently practiced in China. In

particular, Nexant will consider the viability of coal to chemicals technology in China in a low oil price

environment. The report will address the main technological pathways to coal-to-chemical conversion

and the relative competitiveness (economics) of coal to chemical routes as compared to the common

petrochemical route from petroleum or natural gas. The study will provide a snapshot of comparative

economic analysis of petrochemicals via the oil/natural gas versus coal to chemicals economics on a

mine-mouth basis.

Building on the previous 2013 study on coals to chemicals, this study will address policy shifts impacting

the Chinese coal to chemicals industry along with their effect on financial return. The study will also

include a wider coverage of the leading (i.e. improved effective conversion rate) CTO processes

available, as well as an analysis of capital costs and their effect on competitiveness.

The report will be a valuable resource for investors, marketers, and petrochemical companies that have

already invested or looking to invest in the coal to chemicals industry. The report will also provide insight

to other chemical producers into the shifting competitiveness of coal based chemicals in a low-priced oil

environment. The key questions the study will address include:

What are the leading and effective coal to chemical technologies available?

How does the changing spread between coal and crude affect the relative production economics

of coal to olefins in China?

How competitive are the coal to chemical routes compared to competing petrochemical/natural

gas routes in a cheap oil scenario?

How will the new environmental policy shifts in China affect economics and returns for these

processes?

What will be the impact of the new technical guidelines in China on the competitiveness of these

processes?

What will be the impact of changes in delivery infrastructure on delivered cost of chemicals?

How will the increasing financing charges in China impact cost of capital and competitiveness of

new coal to chemical projects?

This prospectus describes Nexant’s “Coal to Chemicals – Viable in a Low Oil-Price Environment?” multi-

client study, provides the proposed report Table of Contents, the methodology to be employed, and

Nexant’s qualifications to perform such a study. The study is targeted to be published at the end of Q3

2015.



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Section 2 Scope of Work

2.1 OVERVIEW

The objective of this multi-client study is to build on Nexant’s Special Report – “Coal to Chemicals:

Visiting and Revisiting the future” published in November 2013. The study will profile and assess the

state of technology as related to coal to chemicals production and include cost of production economics

for selected coal to chemical plants located in China. The study will further compare the economics of

petrochemical versus coal to chemicals production especially in the current situation of low crude oil

prices. The coal to chemicals plants will be pro-forma plants located at the mine mouth in an interior coal

rich region in China (i.e., Inner Mongolia). Economics will also be prepared for Leader plants that use

naphtha feedstock and serve the Chinese market for the same products. The two sets of economics will

be compared on a landed (port) “Coastal China” basis which is representative of the primary product

markets in China.

2.1.1 Comparative Economics - Coal versus Naphtha Feedstock

Leader cost of production economics are to be provided for each of the coal to chemical technologies

noted below (using one representative coal gasification technology). Comparative economics will also be

provided for one leading petrochemical route for each of the below mentioned products as follows:

Methanol (imported from the Middle East, natural gas)

Ammonia (China, natural gas)

Urea (China, natural gas)

Ammonium nitrate (China, natural gas)

MEG (two analyses)

- imported from the Middle East, integrated with an ethane cracker

- imported from Taiwan using merchant ethylene

MTO/Polyolefins (two analyses for injection molding HDPE):

- imported from the Middle East, integrated with an ethane cracker

- imported from Korea using merchant ethylene

PP (Coastal China, merchant propylene, General Purpose homopolymer PP)

Aromatics (Coastal China, pygas extraction)

Acetic Acid (imported methanol and natural gas)

Vinyl acetate (imported from Korea, made with merchant ethylene)

PVC (imported VCM)

Butanediol (via n-butane, coastal China)

Acrylic acid (via merchant propylene; Coastal China)

Acrylonitrile (via merchant propylene; Coastal China)

Ethanol (via ethylene hydration, merchant ethylene Coastal China)

An illustrative cost of production analysis is shown in Table 2.1.



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Table 2.1 Polypropylene Cost of Production Estimate US Gulf Coast

2.1.2 Gasification Technologies

The study will review gasification technology associated with chemicals production and discuss the

challenges and opportunities such technologies face. Nexant will describe and review the primary

technologies for coal gasification and investigate recent developments that are important from both cost

and environmental perspectives. Nexant will review the following gasification technologies:

Fixed-bed reactors

Fluidized-bed reactors

Entrained-flow reactors

CAPITAL COST MILLION U.S. $

Plantstart-up 2011 Inside BatteryLimits(ISBL) 113.20

Outside Batter Limits (OSBL) 94.10

Location Total Plant Capital 207.30

Capacity 400 thousand tons per year Other Project Costs (OPC) 51.83

882 millions lbs per year Total Project Investment 259.13

Operating rate 100 percent Working capital 64.53

Throughput 400 thousand tons per year Total Capital Employed 323.66

UNITS PRICE ANNUAL

Per Ton U.S. $/ U.S. $ COST U.S.$ U.S. $

PRODUCTION COST SUMMARY Product Unit Per Ton millions Per Lb

RAW MATERIALS Propylene ton 1.0023 1,958.00 1,962.50 785.00

Hydrogen ton 0.0001 7,016.00 0.70 0.28

Extruder Additives ton 1.0000 11.00 11.00 4.40

Catalysts & Other Chemicals U.S. $ 1.0000 11.00 11.00 4.40

TOTAL RAW MATERIALS 1,985.21 794.08 0.90

BYPRODUCT CREDITS - -

NET RAW MATERIALS 1,985.21 794.08 0.90

UTILITIES - -

Cooling Water kiloton 0.0550 27.87 1.53 0.61

Electrical Energy MWh 0.2549 52.13 13.29 5.32

Inert gas Nm³ 28.9900 0.07 2.03 0.81

Process Water ton 0.0002 322.42 0.06 0.03

Steam (high pressure) ton 0.0320 18.19 0.58 0.23

Steam (medium pressure) ton 0.0080 16.14 0.13 0.05

Steam (low pressure) ton 0.0800 15.89 1.27 0.51

TOTAL UTILITIES 18.90 7.56 0.01

NET RAW MATERIALS & UTILITIES 2,004.10 801.64 0.91

VARIABLE COST 2,004.10 801.64 0.91

DIRECT FIXED COSTS Labor 23 employees 50,677 U.S. $ 2.91 1.17

Foremen 4 employees 57,522 U.S. $ 0.58 0.23

Supervisor 1 employees 69,410 U.S. $ 0.17 0.07

Mainteace, Material &Labor 2 % of ISBL 5.66 2.26

Direct Overhead 45 % Labor & Supervision 1.65 0.66

TOTAL DIRECT FIXED COSTS 10.97 4.39 0.00

ALLOCATED FIXED COSTS General Plant Overhead 60 % Direct Fixed Costs 6.58 2.63

Insurance, PropertyT ax 1 % Total Plant Capital 5.18 2.07

Environmental 0 % Total Plant Capital - -

TOTAL ALLOCATED FIXED COSTS 11.77 4.71 0.01

TOTAL FIXED COSTS 22.74 9.09 0.01

TOTAL CASH COST 2,026.84 810.74 0.92

Depreciation @ 10 % for ISBL & OPC 5 % for OSBL 53.02 21.21 0.02

COST OF PRODUCTION 2,079.86 831.94 0.94

Return on Capital Employed (ROCE) @ 10% 80.91 32.37 0.04

COST OF PRODUCTION + ROCE 2,160.77 864.31 0.98



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Leader economics for each of the three technology types will be developed using a mine-mouth China

basis.

2.1.3 Product Technologies

This study will further examine the technologies for coal to chemicals by reviewing and evaluating the

processes and economics for the production of major petrochemicals, including:

Methanol (from coal syngas)

Ammonia (from coal syngas)

Urea (from coal syngas)

Ammonium nitrate (from coal syngas)

MEG (from coal syngas)

MTO/Polyolefins (via methanol from coal syngas; Injection Molding HDPE as the polyolefin)

MTP/PP (via methanol from coal syngas; General Purpose Homopolymer PP)

Acetic Acid (via methanol from coal syngas)

Aromatics (via methanol from coal syngas)

Vinyl acetate (via acetylene from calcium carbide)

VCM/PVC (via acetylene from calcium carbide; suspension PVC)

Butanediol (via acetylene from calcium carbide)

Acrylic acid (via acetylene from calcium carbide)

Acrylonitrile (via acetylene hydrocyanation)

Ethanol (Celanese technology)

For the derivative units (i.e., HDPE), Nexant will select a Leading technology typical of that utilized in

China.

2.1.4 Location

Cost of production economics will be developed for Mine-mouth China (i.e., a coal rich region such as

Inner Mongolia) as well as for Coastal China using coal as a starting feedstock. Comparative economics

will be prepared for conventional petrochemical routes for each product listed above. Landed economics

will be prepared in cases where the traditional petrochemical routes are not typically practiced in China

(i.e., for methanol from natural gas). All comparisons will be on a Coastal China port basis, meaning that

the Mine-mouth economics will include domestic freight and logistics, while imports include logistics,

freight and any tariff or duty.

2.1.5 Year

Cost of production economics will be prepared for the first half of 2015 on a pro-forma basis. This will be

compared to full year 2020 forecast using Nexant’s most current raw material and other pricing forecasts

for high, medium and low crude oil price scenarios.

2.1.6 Strategic Considerations

The use of coal as a source of carbon for organic chemicals is technically viable and is being actively

developed primarily in China. A key deliverable of this study is the evaluation of the economic

competitiveness of coal versus conventional feedstocks under the new paradigm of cheap oil. Longer



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term, the use of coal is expected to have competitive pressures due to coal’s environmental footprint such

as the greenhouse effect and pollution which governments increasingly measure. Nexant will include a

brief discussion of the strategic issues, as relevant to China, associated with coal use in this study.



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Section 3 Table of Contents

Section

1 Executive Summary ............................................................................................................. 1-1

1.1 OVERVIEW ............................................................................................................... 1-1

1.2 ECONOMICS ............................................................................................................ 1-3

1.3 COAL TO CHEMICALS STRATEGY ........................................................................ 1-5

1.3.1 Drivers for the Adoption of Coal to Chemicals ............................................. 1-5

1.3.2 Strategic Implications of This Study ............................................................. 1-6

2 Introduction........................................................................................................................... 2-1

2.1 OVERVIEW ............................................................................................................... 2-1

2.2 STRATEGIC DRIVERS FOR THE GROWTH OF COAL TO CHEMICALS

PROCESSES ............................................................................................................ 2-1

2.2.1 China ............................................................................................................ 2-1

2.2.2 Rest of World ................................................................................................ 2-3

2.3 OIL PRICE SCENARIOS AND SPREAD TO COAL COMPARISON ....................... 2-4

2.4 GENERAL ASSESSMENT OF COAL TO CHEMICALS BREAKEVEN ................... 2-5

2.5 SCOPE OF THIS REPORT....................................................................................... 2-6

3 Coal Gasification Technologies .......................................................................................... 3-1

3.1 OVERVIEW ............................................................................................................... 3-1

3.2 COAL CHARACTERISTICS AFFECTING GASIFICATION ..................................... 3-9

3.3 PROCESS TECHNOLOGY....................................................................................... 3-9

3.3.1 GE Energy (Chevron Texaco/GE) Entrained-Flow Gasifier ......................... 3-10

3.3.2 E-GAS (ConocoPhillips) Entrained-Flow Gasifier ........................................ 3-11

3.3.3 Shell Entrained-Flow Gasifier ....................................................................... 3-13

3.3.4 Lurgi Dry-Ash Gasifier .................................................................................. 3-13

3.3.5 British Gas/Lurgi Moving-Bed Gasifier ......................................................... 3-16

3.3.6 Prenflo Entrained-Bed Gasifier .................................................................... 3-16

3.3.7 Noell Entrained-Flow Gasifier ...................................................................... 3-16

3.3.8 High-Temperature Winkler Gasifier .............................................................. 3-16

3.3.9 KRW Fluidized-Bed Gasifier ........................................................................ 3-17

3.3.10 Summary of Gasification Technology Characteristics ................................. 3-17

4 Coal to Acetylene Technology ............................................................................................ 4-1

4.1 OVERVIEW ............................................................................................................... 4-1

4.2 PROCESS TECHNOLOGY....................................................................................... 4-2



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4.2.1 Calcium Carbide Processes ......................................................................... 4-2

4.2.2 Partial Oxidation Processes ......................................................................... 4-10

4.2.3 Acetylene Recovery from Steam Crackers .................................................. 4-18

4.2.4 Hüls Electric Arc Technology ....................................................................... 4-23

5 Conversion Technologies ................................................................................................... 5-1

5.1 OVERVIEW ............................................................................................................... 5-1

5.2 METHANOL (FROM COAL SYNGAS) ..................................................................... 5-2

5.2.1 Chemistry ..................................................................................................... 5-2

5.2.2 Process Description ..................................................................................... 5-3

5.3 AMMONIA (FROM COAL SYNGAS) ........................................................................ 5-8

5.3.1 Chemistry ..................................................................................................... 5-8


5.4 UREA (FROM COAL SYNGAS) ............................................................................... 5-10

5.4.1 Chemistry ..................................................................................................... 5-10


5.5 MEG (FROM COAL SYNGAS) ................................................................................. 5-14

5.5.1 Process Chemistry ....................................................................................... 5-15

5.5.2 Process Design and Operation .................................................................... 5-17

5.6 METHANOL TO OLEFINS (VIA METHANOL FROM COAL SYNGAS) ................... 5-22

5.6.1 UOP/Hydro Advanced MTO Process ........................................................... 5-22

5.6.2 Lurgi MTP® Process .................................................................................... 5-29

5.6.3 Dalian Institute of Chemical Physics (DICP) DMTO Process ...................... 5-36

5.6.4 Sinopec SMTO Process ............................................................................... 5-37

5.6.5 FMTP Process .............................................................................................. 5-38

5.6.6 Market Share of Licensors ........................................................................... 5-39

5.7 ACETIC ACID (VIA METHANOL FROM COAL SYNGAS) ....................................... 5-40

5.7.1 Chemistry ..................................................................................................... 5-40


5.8 VINYL ACETATE (VIA ACETYLENE FROM CALCIUM CARBIDE) ........................ 5-46

5.8.1 Chemistry ..................................................................................................... 5-46


5.9 VCM (VIA ACETYLENE FROM CALCIUM CARBIDE) ............................................. 5-49

5.9.1 Chemistry ..................................................................................................... 5-49


5.10 BUTANEDIOL (VIA ACETYLENE FROM CALCIUM CARBIDE) .............................. 5-52

5.10.1 Chemistry ..................................................................................................... 5-52



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5.11 ACRYLIC ACID (VIA ACETYLENE FROM CALCIUM CARBIDE) ........................... 5-58

5.11.1 Chemistry ..................................................................................................... 5-58


5.12 ACRYLONITRILE (VIA ACETYLENE FROM CALCIUM CARBIDE) ........................ 5-61

5.12.1 Chemistry ..................................................................................................... 5-61


5.13 ETHANOL (CELANESE TCX TECHNOLOGY) ........................................................ 5-65

5.13.1 Chemistry ..................................................................................................... 5-65


6 Economics ............................................................................................................................ 6-1

6.1 BASIS OF ECONOMICS ........................................................................................... 6-1

6.2 METHODOLOGY ...................................................................................................... 6-1

6.2.1 Cost of Production Terminology ................................................................... 6-1

6.2.2 Location Factors ........................................................................................... 6-2

6.2.3 Plants Considered ........................................................................................ 6-3

6.3 FEEDSTOCK PRICES .............................................................................................. 6-4

6.3.1 Gas Prices .................................................................................................... 6-5

6.3.2 Coal Price in China ....................................................................................... 6-6

6.3.3 Corn Price in China ...................................................................................... 6-7

6.4 SHIPPING & TARIFF COSTS ................................................................................... 6-8

6.4.1 Shipping Costs ............................................................................................. 6-9

6.4.2 Tariff ............................................................................................................. 6-10

6.5 COAL-BASED CHEMICAL PRODUCTION – MINE-MOUTH CHINA ...................... 6-11

6.5.1 Methanol (from Coal Syngas) ...................................................................... 6-12

6.5.2 Ammonia (from Coal Syngas) ...................................................................... 6-13

6.5.3 Urea (from Coal Syngas) ............................................................................. 6-15

6.5.4 Ammonium Nitrate (from Coal Syngas) ....................................................... 6-17

6.5.5 MEG (from Coal Syngas) ............................................................................. 6-19

6.5.6 HDPE – Injection Molding (Integrated with Ethylene via MTO) ................... 6-21

6.5.7 Polypropylene – General Purpose Homopolymer (Integrated with

Propylene via MTP) ...................................................................................... 6-25

6.5.8 Acetic Acid (via Methanol from Coal Syngas) .............................................. 6-27

6.5.9 Vinyl Acetate (via Acetylene from Calcium Carbide) ................................... 6-29

6.5.10 PVC (via Acetylene/VCM from Calcium Carbide) ........................................ 6-31

6.5.11 Butanediol (via Acetylene from Calcium Carbide) ....................................... 6-33



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6.5.12 Acrylic Acid (via Acetylene from Calcium Carbide) ...................................... 6-35

6.5.13 Acrylonitrile (via Acetylene Hydrocyanation) ................................................ 6-37

6.5.14 Ethanol (Celanese Technology) ................................................................... 6-39

6.6 COMPARATIVE ECONOMICS TO NAPHTHA – COASTAL CHINA ....................... 6-41

6.6.1 Methanol ....................................................................................................... 6-41

6.6.2 Ammonia ...................................................................................................... 6-41

6.6.3 Urea .............................................................................................................. 6-42

6.6.4 Ammonium Nitrate ........................................................................................ 6-43

6.6.5 MEG ............................................................................................................. 6-44

6.6.6 HDPE – Injection Molding ............................................................................ 6-45

6.6.7 Polypropylene – General Purpose Homopolymer ........................................ 6-46

6.6.8 Acetic Acid .................................................................................................... 6-47

6.6.9 Vinyl Acetate ................................................................................................ 6-48

6.6.10 PVC .............................................................................................................. 6-49

6.6.11 Butanediol .................................................................................................... 6-50

6.6.12 Acrylic Acid ................................................................................................... 6-51

6.6.13 Acrylonitrile ................................................................................................... 6-52

6.6.14 Ethanol ......................................................................................................... 6-53

6.7 CONCLUSIONS ........................................................................................................ 6-54

7 Strategic Implications .......................................................................................................... 7-1

7.1 COMPETITIVENESS ................................................................................................ 7-1

7.1.1 Methanol ....................................................................................................... 7-1

7.1.2 Ammonia, Urea, and Ammonium Nitrate ..................................................... 7-2

7.1.3 MEG ............................................................................................................. 7-2

7.1.4 Olefins and Polyolefins ................................................................................. 7-3

7.1.5 Acetic Acid .................................................................................................... 7-3

7.1.6 Vinyl Acetate ................................................................................................ 7-4

7.1.7 PVC .............................................................................................................. 7-4

7.1.8 1,4-BDO ....................................................................................................... 7-5

7.1.9 Acrylic Acid and Acrylonitrile ........................................................................ 7-5

7.1.10 Ethanol ......................................................................................................... 7-5

7.2 SENSITIVITIES TO COAL PRICE ............................................................................ 7-6

7.3 SENSITIVITIES TO COAL VERSUS NAPHTHA SPREAD ...................................... 7-7

7.4 FUTURE POLICY CHALLENGES ............................................................................ 7-8

7.4.1 INTRODUCTION .......................................................................................... 7-9

7.4.2 NEW ENVIRONMENTAL POLICY & LIMITED WATER SUPPLY ............... 7-10



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7.4.3 INCREASING FINANCING CHARGES ....................................................... 7-11

7.4.4 NEW TECHNICAL GUIDELINES ................................................................. 7-12

7.4.5 IMPACT OF NEW GOVERNMENT POLICY ON COSTS ............................ 7-13

Appendix Page

A Cost of Production Estimates ............................................................................................. A-1



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Section 4 Approach

The evaluations of conventional technology will be based on Nexant’s in-house and published information

regarding process technology, augmented by contacts with licensors, engineering contractors and other

experts in the industry. The evaluations of developing technology will be “built up” from a review of

patents, public domain information, and discussions with technology development companies and

engineering contractors.

Nexant uses proprietary and commercial state-of-the-art software tools to develop the technology and

economic estimates. These are well established, state-of-the-art engineering tools in the chemical

process industry and are used by major engineering contractors.

The economic evaluations are designed to approximate typical regional costs of production based on

capital costs that are appropriate for “factored estimates”. They do not reflect specific site issues, but are

a reasonable representation of the subject countries/regions.



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Section 5 Qualifications

5.1 GENERAL

Nexant uses multidisciplinary project teams drawn from the ranks of our international staff of engineers,

chemists, economists and financial professionals, and from other Nexant groups to respond to the

requirements of each assignment. Most of the consulting staff possesses credentials in both scientific

and commercial disciplines plus substantial industrial experience. The collective talents of our staff are

strategically located and closely linked throughout the world, resulting in valuable insights gained through

a variety of perspectives.

Nexant is an international consultancy and is dedicated to assisting businesses within the global energy,

chemical, plastics, and process industries by providing incisive, objective, results-oriented management

consulting. Over four decades of significant activity translates into an effective base of knowledge and

resources for addressing the complex dynamics of specialized marketplaces. By assisting companies in

developing and reviewing their business strategies, in planning and implementing new projects and

products, diversification and divestiture endeavors and other management initiatives, Nexant helps clients

increase the value of their businesses. Additionally, we advise financial firms, vendors, utilities,

government agencies and others interested in issues and trends affecting industry segments and

individual companies.

The Nexant Group was formed as an independent global consulting company in 2000, combining a

number of companies that had a long history of providing consultancy services to the chemical and

refining-related industries. Nexant’s experience covers all aspects of project development relating to

major refinery, petrochemical, and polymer investments, ranging from grassroots plants to revamps of

existing process units. Nexant’s key offices serving the petrochemical and downstream oil sectors are

located in New York, Houston, London, Bangkok and Bahrain, and locations for other offices are shown in

Figure 5.1.

Figure 5.1 Nexant Office Locations

Headquarters Main Offices

Representative Offices

San FranciscoWashington, DC

White Plains

LondonFrankfurt

Bahrain

TokyoSeoul

Shanghai

Singapore

Kuala LumpurBangkok

Buenos Aires

La PazRio de Janeiro

Project Offices

New Delhi

Pretoria

Abuja



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From major multinationals to locally based firms and governmental entities, our clients look to us for

expert judgment in solving compelling business and technical problems and in making critical decisions.

Nexant’s clients include most of the world’s leading oil and chemical companies, financial institutions, and

many national and regional governments. Nexant, Inc. is active in most of the industrialized countries of

the world, as well as in most of the developing areas including the Middle East, Africa, and East and

Southeast Asia.

Major annual subscription programs are:

Process Evaluation/Research Planning (PERP)

Petroleum & Petrochemical Economics (PPE)

Polyolefin Planning Service (POPS)

The PERP program covers technology, commercial trends, and economics applicable to the chemical

industry. The program has more than 40 subscribers, including most of the major international chemical

companies. Many of the processes to be analyzed in this multi-client study have been assessed in the

PERP program.

The PPE program provides historic and forecast analysis of the profitability, competitive position and

supply/demand trends of the global petroleum and petrochemical industry. The program includes

capacity listings and analysis, global supply, demand and trade balances, profitability, competitiveness,

and price analysis and projections for all the major petrochemical value chains. The PPE program is

supported by an internet-based planning and forecasting tool that provides online access to the database

behind the reports of the PPE program.

The POPS program provides reports on the global polyethylene and polypropylene industry. It is

recognized globally as the benchmark source for detailed information and analysis on current

commercial, technical and economic developments in the polyolefins industry. Coverage includes:

capacity listing and analysis, detailed consumption, supply/demand, trade, operating rates, price

forecasts, technological developments, new products, inter-material substitution and regional

competitiveness.



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5.2 SUMMARY OF PROJECTS RELATED TO COAL-TO-CHEMICALS

COAL TO CHEMICALS – VISITING AND REVISITING THE FUTURE – The objective of this

multi-client study completed by Nexant was to profile and assess the state of technology as

related to coal to chemicals production, as well as benchmark the competitiveness of coal to

chemicals technologies vis-à-vis conventional processes. The study included cost of production

economics for selected pro-forma coal to chemical plants located at the mine-mouth in the interior

coal rich region in China. The study also included economics for conventional processes for

leader plants serving Chinese markets to provide comparative economics.

SYNTHETIC FUEL CAPITAL AND PRODUCTION COSTS -- Nexant performed this study for the

U.S. Department of Energy (DOE) as input to their assessment of the costs and benefits of

flexible and alternative fuel use in the U.S. transportation sector. Nexant reviewed state-of-the-art

coal liquefaction technology and developed production cost estimates for producing synthetic

crude and then upgrading the syncrude to a gasoline product

CHEMICALS FROM COAL AND SHALE FEEDSTOCKS -- Recognizing the eventual importance

of coal and shale resources in replacing gas and petroleum, this study examined the various

technologies that could be used to produce feedstocks and chemicals. Three separate potential

implementation cases were treated in detail: Economic, By-product, and "National Need." The

production of synthetic fuels, olefins and aromatics and their derivatives from coal and shale were

projected. A large number of patent references and flowsheets are included in the study, which

also reviewed the chemical implications of synthetic fuels programs in the United States and

elsewhere. There is also a section on utilization of U.S. tar sands resources

SYNTHESIS GAS (FUTURE SOURCES) -- This report reviewed the technology for production of

synthesis gas (H2, CO mixtures) from a number of sources. Most emphasis was devoted to coal

and biomass (municipal solid waste and wood) gasification and new gasification technology. The

report discussed downstream processing requirements and examined coal and biomass

properties and their impact upon gasifier design. The economics of producing industrial fuel gas

(gasifier effluent after acid gas removal) via different routes were compared to the direct use of

natural gas and low sulfur fuel oil

HYDROGEN-SYNTHESIS GAS STUDY -- Nexant completed a Multiclient study on the

production of hydrogen and synthesis gas from heavy oils and coal. The objective of this study

was to analyze the effects on the U.S. natural gas shortage on that portion of the petrochemical

industry dependent upon natural gas as a feedstock, with particular emphasis on ammonia,

methanol, and hydrogen-based chemicals. The study included a section on comparative costs

for all hydrocarbon feedstocks from natural gas to coal

WEST GERMAN COAL RESEARCH AND DEVELOPMENT/COAL GASIFICATION -- West

German companies have undertaken a massive effort to update their technologies to meet motor

fuels and chemical requirements from indigenous and imported coals. An unusually productive

marriage of government and private money, deployed in pilot plants located in chemical and

energy complexes, is steadily advancing the state of the art in West Germany. Promising United

States technologies are also being considered and improved. This study reviewed and analyzed

the individual programs for their merit and impact on synthetic fuels and coal-based chemicals

projects in the industrialized countries

EVALUATION OF COAL BASED AMMONIA/METHANOL PROJECT -- Nexant developed the

overall facilities concept and developed capital cost estimates for this project. Lurgi and Koppers-

Totzek gasifiers were studied in detail. Internal steam and power balances were developed and

the optimal synthesis gas processing sequence was developed



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EVALUATION OF COAL/NATURAL GAS BASED METHANOL/POWER -- Nexant developed

the overall facilities concept and capital cost estimates for an integrated complex employing

"second generation" coal gasification, steam/methane reforming and combined cycle power

generation technologies for the co-production of methanol and power. Relative coal and natural

gas consumption was based on producing a stoichiometrically balanced methanol synthesis gas

from coal-based hydrogen deficient and natural gas based carbon deficient synthesis gases

COAL TAR CHEMICALS -- In response to a Japanese company's request for an analysis of coal

tar chemicals, Nexant conducted a study of U.S. and West European markets/applications and

evaluated the technology for four basic coal tar chemicals and specific hydrogenated derivatives.

The compounds studied included tetralin, biphenyl, acenaphthene, phenanthrene, and

hydrogenated derivatives of acenaphthene and phenanthrene. The technology review covered

all aspects of the chemistry of these materials as well as all applications and developments

worldwide

IMPACT OF COAL CONVERSION PLANTS ON AROMATICS -- For a U.S. chemical company,

Nexant assessed the economic feasibility of aromatics recovery from byproducts streams of coal

gasification and coal liquefaction plants. Production technology and economics are provided for

benzene, toluene, phenol, cresol, xylenol, and coal derived naphtha

SMOKELESS FUELS FROM COAL -- For a specialty fuel producer, Nexant identified and

characterized methods for producing smokeless briquettes that met international standards and

identified potential binders that could be used with existing equipment to produce smokeless

briquettes that could be used for export. Binders studied included: coal tar pitch, petroleum resin,

coal and starch

MARKETING ASSESSMENTS OF COAL PRODUCTS/BYPRODUCTS -- Nexant, under contract

to Tri-State Synfuels Company (a partnership between Texas Eastern Synfuels Inc. and Texas

Gas Synfuel Corporation) examined in detail the marketability of products from a Lurgi/Fischer-

Tropsch coal-based facility being considered for Henderson, Kentucky. The coal conversion

facility was being evaluated by Tri-State under a cooperative funding agreement with the U.S.

Department of Energy. The products from the plant included high Btu substitute natural gas

(SNG) liquid transportation and heating fuels, and a wide range of chemical products and

byproducts. Nexant analyzed the general eight-state region surrounding the proposed plant.

Recommendations and observations were made relating to possible changes in the originally

envisioned slate of products that might improve the project's revenue generation capability.

Future product prices and values were forecast, based on Nexant's prevailing long-term

prognosis of energy, petroleum and petrochemical demands. Nexant performed two similar

market analysis studies for New York Power Authority (NYPA). One involved a proposed 600

MW coal gasification combined cycle power plant considered for the Buffalo area. Nexant

analyzed current and future markets for the fuels and chemicals (including synthesis gas

derivatives) that could be manufactured in the complex. The second study was for a coal

gasification plant being evaluated by NYPA for the South Bronx. Products considered for this

plant included medium-Btu gas (and potential products) steam, sulfur, carbon dioxide and

industrial gases (oxygen, nitrogen and argon)

VALUE OF COED PROCESS COAL-DERIVED LIQUIDS IN A PETROLEUM REFINERY -- This

study analyzed the value of liquids produced in a plant designed to make synthetic crude oil from

coal

VALUE OF LIQUIDS PRODUCED FROM COAL IN A COG (COAL, OIL GAS) REFINERY --

This study, for the Pittsburgh & Midway Coal Mining Company, determined the value of coal-

derived liquids in petroleum refineries



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COAL-METHANOL SLURRY PREFEASIBILITY STUDY -- This study analyzed the economic

viability of using coal-methanol slurry fuels in Malaysia

COAL-LIQUID MIXTURE -- Assistance was provided to the U.S. Synthetic Fuels Corp., on oil,

water and methanol coal mixture technologies, economics and markets in regard to defining the

scope for a planned solicitation

COAL MINE ASSETS APPRAISAL -- Certain coal mining equipment (mobile and fixed) and

systems were evaluated and appraised in support of a lease financing

EVALUATION OF COAL TO SYNTHETIC GASOLINE PROJECT -- This project compared the

attractiveness of gasoline production from coal derived methanol via the Mobil MTG (methanol-to-

gasoline) process, to the economics of direct coal liquefaction as well as coal based methyl fuel

production

CHEMICALS FROM COAL AND SHALE -- This study was performed under an RANN grant by

the Office of Energy R&D Policy, NSF. The objectives of this study were: estimate feedstock

demands for major organic chemicals; gauge the probable timing as to when chemical feedstock

demands will constitute an unreasonably large fraction of conventional hydrocarbon sources;

identify the potential technologies for (a) transformation of coal and shale building blocks to

primary organic chemical building blocks or feedstocks, and (b) synthesis of current

"petrochemicals" from such coal and shale-derived building blocks; define research and

development strategies and a related program to assure that any conversion of the organic

chemical industry to coal and shale would be based upon available and the most economically

possible technology

SYNTHESIS GAS FOR CHEMICALS -- This Multiclient report dealt with the applicability of emerging synthesis gas based routes to chemicals compared to traditional production methods. The synthesis gas based routes were analyzed based on the economics of large-scale production of synthesis gas from coal

COAL TO UREA PROJECT EVALUATION -- This report for LGI International provides an evaluation for the market and profitability of coal based methanol and derivatives production.

MARKET ASSESSMENT FOR COAL TO CHEMICAL COMPLEX – This study for Worley Parsons and InterRAO is part of a feasibility assessment ranking for a Russian coal gasification project. The assessment recommends chemicals that might be produced based on production of methyl, incorporating market and competitive factors, but not technology or cash flow.



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Section 6 Contact Information

AMERICAS

Nexant, Inc.

44 South Broadway, 4th Floor

White Plains, NY 10601-4425

U.S.A.

Attn: Vai Ravindran

Consultant

Tel: + 1-914-609-0384

Fax: + 1-914-609-0399

Email: [email protected]

EUROPE

Nexant Limited

1 King's Arms Yard, 1st Floor

London EC2R 7AF

United Kingdom

Attn: Anna Ibbotson

Principal

[email protected]

Or

Attn: Heidi Junker Coleman

Global Programs Support Manager

Tel: + 1-914-609-0381

Fax: + 1-914-609-0399

e-mail: [email protected]

ASIA

Nexant (Asia) Ltd

22nd Floor, Rasa Tower 1

555 Phahonyothin Road

Kwaeng Chatuchak, Khet Chatuchak

Bangkok 10900

Thailand

Attn: Tiankanok Sirichayaporn

Senior Consultant

[email protected]

mailto:[email protected]





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Section 6 Contact Information

Nexant, Inc.

San Francisco

New York

Houston

Washington

London

Frankfurt

Bahrain

Singapore

Bangkok

Shanghai

Kuala Lumpur

www.nexant.com


Documents

Nexant Complete Report template · coal reserves in Western China. Spurred by technological advances and cheap coal from Inner Mongolia, China invested heavily in coal-to-chemical