GW/Climate Change: Why methane is so important

imagesFor some time now, it has become obvious that natural gas and crude oil production from shale deposits results in significant emissions of methane, a much more potent greenhouse gas than carbon dioxide. Efforts by drillers and gas distributors to reduce the amount of leakage during production, processing, transmission and distribution are being undertaken, as well as regulatory actions. But the problem will be difficult to solve. It is of interest to note that the recent report “Pathways to Deep Decarbonization” issued by the Sustainable Development Solutions Network does not even consider the methane “problem”, focussing entirely on carbon dioxide abatement or capture and changes in energy sources supply (major switch to renewables) and lifestyle changes. So, it is important to put this matter in perspective.

Because of its structural characteristics in terms molecular bonds, methane has a much greater global warming potential (GWP)than carbon dioxide, though its effects last over much less time. A recent article in Chemical and Engineering News the 20-year GWP of methane is 86 times greater than the GWP of CO2. (That figure shrinks rapidly as time progresses.)  This is significant because scientists, including those conducting the Decarbonization study, believe it is essential to limit the increase in mean global surface temperature from rising more than 2 degrees Centigrade, with even that much increase posing a threat to human wellbeing. Their calculations and others (e.g. the Potsdam Institute for Climate Impact Research) project an increase of 2.5 to 7.8 degrees C by the end of the century if nothing is done to limit GHG emissions.

This puts the spotlight directly on methane, because the short term harmful effects of methane emissions may be more important than those of carbon dioxide. Still, there is a great controversy as to how much methane is actually being emitted or burned to carbon dioxide as a result of oil and gas drilling and natural gas transportation and distribution. Current estimates vary from 1-2% of natural gas production (EPA estimate) to as high as 6-12%, based on samples taken from aircraft over natural gas fields. At the higher levels, using natural gas instead of coal would result in a more harmful GHG situation! And the picture is made worse by the fact that in some areas (e.g.the Bakken field) where only oil is produced, the associated gas is burned and flared. Also, since natural gas is now relatively cheap, there is less incentive for drillers to reduce gas leakage at the well (short of tighter regulations). And then there are the hundreds of thousands of old, existing wells many of which still emit methane. Still, if the EPA’s estimates of methane leakage are in the right ballpark, this source of methane emissions still ranks below that of worldwide emissions from livestock(!).

All of this does not even consider the release of methane from Arctic permafrost and methane hydrates in the ocean waters as global warming proceeds.

Methane concentrations in the atmosphere  started rising sharply around 1900 and have more than doubled since that time. From all of the above, it can certainly be argued that both methane and CO2 must be considered if serious steps are to be taken to limit global temperature rise, with methane apparently a more serious short term problem, but one that can be tackled more easily by reducing leakage. There is a tremendous economic incentive, as well. A leakage of even 1.2% of production is worth about $2 billion in lost revenue.

I am particularly interested in readers’ comments on this issue.

 

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Flue gas carbon removal: Skyonic’s approach

imagesCALD2L5JA new EPA ruling, just validated by the U.S. Supreme Court, is aimed at substantially reducing carbon dioxide emission in the flue gas from coal-fired power plants and other large coal-burning plants. In previous posts on this blog I have discussed different technologies designed to achieve this goal, including carbon capture. These include scrubbing flue gas with amines or other alkalis, using oxygen instead of air to burn the coal (both possible for retrofits) or gasifying (instead of burning) the coal to produce a “synthesis” gas for combined cycle operation, again with carbon dioxide recovery. In all cases, carbon dioxide is either sold (valuable for tertiary recovery of crude oil) or stored underground. The first was tested in a U.S. plant without great success and may shortly be tested in China, the second is starting to be used in  two (250KW and 100KW, respectively) power plants in Germany and Korea, and the last will be employed in a very costly government supported combined cycle-based plant fueled with lignite in Missouri. The “bottom line” is that no technology is currently available and economically justified to deal with carbon emission and capture.

This brings me to Skyonic, a private company, which is developing an entirely new technology with both private and public support. Its unique approach involves capturing the carbon dioxide with caustic soda (sodium hydroxide) and turning it into sodium bicarbonate, an article of commerce. The caustic soda is produced in a conventional adjacent chlor-alkali plant where the chlorine co-product is reacted with hydrogen co-product to make hydrochloric acid, another article of commerce, now needed in large quantities for the hydraulic fracturing “fracking” process, as well as for other industrial uses.

Skyonic’s so-called SkyMine process has been piloted and is now about to be demonstrated in a commercial-sized facility at a cement plant in San Antonio Texas, with startup slated for October 2014. A chlor-alkali plant was constructed adjacent to the cement plant and a substantial percentage of the flue gas will be fed into the SkyMine facility that also sits next to the plant. The economics for the technology look good, with offtakers for both the sodium bicarbonate and the hydrochloric acid.Skymine

The obvious drawback to the process is the need to sell the very substantial amounts of sodium bicarbonate produced. While there are a series of markets for this chemical ( baking soda, toothpaste, animal feed, etc) the amount of bicarbonate produced by several SkyMine plants would soon flood the market. Large-coal-based power plants would therefore not be a prime target. However, steel plants, which emit much less carbon dioxide and need hydrochloric acid for steel “pickling” would be a more logical place for the process. Other types of plants that will need to remove carbon dioxide from their flue gas would also evaluate SkyMine.

The company has two answers for the bicarbonate market issue. It plans to sell the technology in other countries where large bicarbonate markets exist and it is also looking at adapting the process to make sodium carbonate (a much larger market : glass, soap, paper) and calcium carbonate instead of bicarbonate.

 

 

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Westlake MLP opens new chapter

ScanEthyleneWow! How the U.S. petrochemical world has changed! The shale gas “revolution” has made the production of ethylene from ethane so profitable that a downstream integrated ethylene producer can now “donate”( well, actually sell, but under favorable conditions) some of his profits to investors in a new Master Limited Partnership(MLP) that will own the olefin production facilities and will sell the ethylene to the owner of the downstream facilities (polyethylene, PVC), on a cost plus basis.  Westlake MLP has just filed a registration statement that people familiar with the industry may want to read.

Profits from production of ethylene used to be highly cyclical, depending on the state of the industry: High margins (though nothing like today’s) when there was a shortage and little or no profit at other times.  Ethylene prices are set by supply-demand considerations and the cash cost of the marginal(highest cost) producer.. With naphtha the dominant global feedstock and high U.S. natural gas costs, the U.S., before the fracking era, had little competitive advantage. The above graphic shows how things have changed. The U.S. and the Middle East are now the lowest cost ethylene producers and the world ethylene price is set by Europe and Asia, the marginal producers, which continue to use naphtha feedstocks. Under current conditions, U.S. ethylene producers have a profit margin of around 40 cents per pound at relatively stable year/year ethylene prices around 55 cents per pound, based on naphtha feedstock from  $ 100 per barrel crude oil.  The proposed Westlake MLP will sell its ethylene to Westlake Chemical at cost plus a fixed margin of 10 cents per pound, allowing the chemical company to retain most of the margin. Nevertheless, investors in the MLP should enjoy a good return with relatively little risk. And the principal Westlake Chemical owners will, no doubt, be substantial investors as well as general partners in the MLP (as was the case in another highly successful MLP in the fertilizer area created a few years ago when Terra Nitrogen MLP was spun off from Terra Chemicals after a merger).

An article in the June 2nd edition of Chemical and Engineering News discusses the recent rapid growth of MLP’s (see graphic) which offer substantial tax advantages as they avoid the double taxation (to corporations and investors) inherent in corporate dividends and because some or most of the dividends are treated as return of capital.They have been used for energy assets used by firms that generate 90% of their income from extracting, transporting, processing or selling natural resources, mainly natural gas and oil. Recently, ethylene plants were added to the list of eligible assets for MLP’s.

Time was, as they say, when petrochemical producers thought about (but didn’t) spin their (high investment/uncertain profitability) ethylene plants off as  “utilities” that would guarantee investors a small (taxable) profit for delivering and selling ethylene to their downstream operations. That way, the uncertain financial performance of their ethylene plants would come off the company’s books. With successful MLP’s paying dividends substantiall higher than those offered by large utilities and tax free to boot, this idea has been realized in a manner that seems like a win-win situation for everybody.

A number of other petrochemicals producers (e.g. Methanex, Dow, Lyondell) are studying the possibility of creating MLP’s. As a long-time investor in successful  MLP’s (not all are doing well for various reasons), I will be taking a close look at the Westlake MLP when it comes out. It’s true that other countries will sooner or later have shale gas, but short of an economic collapse of the petrochemical industry it will be a long time before the global price for ethylene (i.e. with crude oil-based plants as marginal producers) will change, making the Westlake MLP an interesting proposition if the dividend is attractive.

 

 

 

 

 

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LPG for Fracking gaining ground

imagesWhile hydraulic fracturing of shale continues to be a great success in the United States, with tens of thousands of new wells drilled every year for oil and natural gas production, popular resistance to this technology is gaining ground, according to surveys.  The opposition, primarily environmentalists and people in areas where incidents of drinking water contamination have occurred, has, to its credit, succeeded in bringing about more regulations and better enforcement, but public opinion on this technology is still very mixed.  One very cogent argument against fracking, with its relatively heavy use of water, is that water availability for fracking is coming in question in some areas where climate change is arguably responsible for severe drought and serious water shortages. Companies have therefore explored other fracturing fluids, primarily propane, and it appears that this technology will be increasingly used, in part to eliminate problems associated with water-based fracking, such as ground water contamination due to spills and difficulties in removing impurities from and treating fracking waste water that is released to streams. Widespread implementation of LPG-based fracking should help in dealing with the technology’s critics.

When small amounts of ferric sulfate are added to propane, gelling is promoted, and the fluid is then mixed with sand or other proppant to fracture the shale formation. Fewer chemical additives (e.g. biocides, corrosion prevention) are needed than with water-based fracking and the propane simply becomes part of the hydrocarbons being recovered. Gasfrac Energy Services, a Canadian company, has also used butane and pentane.  About 2100 wells have been drilled using this technique. According to the company, the lower surface tension of LPG allows higher yields of hydrocarbons from the well, up to 30 percent higher, according to the company. However, the initial cost of using LPG instead of water is somewhat higher.

ECorp, a Texas-based company, is also using propane for hydraulic fracturing. Its CEO has been talking to European governments about drilling a few demonstration wells in France and Poland, both of which have substantial shale deposits. Western Europe desperately needs indigenous natural gas to lift the stranglehold that Russia’s Gazprom currently exerts, but opposition to fracking is exceptionally strong in France, for example. But the advantages of propane over water may allow developers to eventually overcome strong local resistance.

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Wind, Solar, Storage and Electric Cars – Our high tech renewable future!

offshore3[1]An article in the current issue of MIT Technology Review presents a picture of how renewable energy for power plants is making a greater impact and how it may look not many decades out as wind and solar power are intelligently integrated into a power grid. Readers know that I have traditionally been skeptical about the extent that we may soon rely on huge amounts of renewable energy, but I am certainly interested in developments (including the rapid drop in the cost of solar cells) that will bring us closer to have a more significant percentage of our electricity generation come from wind and power. A number of approaches are already able to optimize the mix of sources a utility relies upon to generate the electricity demand load at any given time. A few decades ahead, the situation could improve more dramatically as daily supply and demand from different energy generation sources are optimally managed, together with electricity “storage”.

In Colorado, Xcel Energy, its largest utility, generates electricity at a number of large wind farms: every few seconds each turbine sends information about how much power it is generating to high speed computers a hundred miles away. These data are crunched with data from weather satellites and from other wind farms, providing wind power forecasts with surprising accuracy. These help the company deal with the big challenge of “intermittency”( Loss of wind, cloudy weather), which requires Xcel and other utilities to operate backup plants burning fossil fuels.  The greatly improved forecasts allow the company to operate much less backup power, thus greatly reducing carbon emission from idling units and saving money. Good forecasts, such as when there is a chance ice could form on wind turbines, slowing or stopping them, can give early warning to start fossil fuel based generators. On nice days, however, all backup plants may be shut down. On such days, wind power becomes the prime variable power source at Xcel and turbine power production can be varied to meet demand. The much better forecasts allow Xcel to project how much  wind power it can expect in 15-minute increments for seven days ahead.

Forecasting solar power is more tricky. It makes sense, however, to see how wind and solar can complement each, given the fact that solar power is generated during the day while wind power is or may be generated at night. But the most interesting approach involves electric and hybrid cars. Cars store enough energy to power a house for a day or more, depending on battery size. With some modifications, car batteries can be reversed to deliver stored power to homes and the power grid. The concept is that when a substantial percent of new cars are electric or hybrid, cars not being driven could store solar power from solar panels during the day and use it to power neighborhoods when electricity peaks in the evening, recharging the batteries with electricity from wind power at night(!) This will obviously require complex forecasts on the number of cars on the road versus charging/discharging at home, weather forecasts, etc. And drivers will worry whether they will be fully charged in the morning – though hybrids would be ok. It could make sense.

In Colorado, wind power is already a major contributor. Similar to what was the case on a summer day in Germany that I wrote in my October 14, 2013 post, Xcel in Colorado on a windy day during a weekend last year supplied 60 percent of its electricity from wind power over a period of one hour(!).

Let’s keep our eyes on battery technology. In Atlantic magazine, ex Energy Secretary Chu projects that battery storage costs will drop radically over the next decade or two. Combined with very cheap solar power, houses away from electricity grids will become independent of utilities as storage batteries supplant external power supply and generators(!). This is already envisioned for parts of Alaska not served by utilities and for parts of Asia and Africa that do not have power grids

Electricity “storage” is also involved in the solar process that heats a circulating fluid which then generates steam – and can be stored for periods of hours or more to generate power when the sun had gone down.(See my post dated December 22nd, 2013). Electricity storage, already being created by pumping water up to reservoirs and then using the downflow to drive turbines, will become a much more important than it is now.

 

 

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A plea for maintaining nuclear plants considered at risk

images[6]A movement is gaining momentum to stop shutting down nuclear power plants that have little or no competitive advantage over natural gas-fired plants or have high maintenance costs. The reason: The less we rely on nuclear energy, the more carbon will be released to the atmosphere to make up the lost electricity now generated by nuclear energy, given the fact that neither solar or wind energy can even come close to making up the large amount of generating capacity that would be lost.

An impressive group of personalities, including Carol Browner, former EPA Administrator, several senators and others have formed a group called Nuclear Matters, which is lobbying for maintaining our nuclear generating capacity to help in limiting carbon emissions. This, to highlight the fact that last year owners shut down or planned to shutter five nuclear power plants representing 4 percent of U.S. nuclear capacity.

All of this is against a background of little nuclear energy having been added since the Three Mile Island incident some forty years ago and the uncertainty about what to do about disposing of nuclear waste.

One possible way to keep some of the nuclear plants in operation is for the EPA to consider a form of “carbon trading” involving coal-fired power plants that would be slated for shutdown if the agency moves ahead with plans to limit carbon emissions. This would allow operators of threatened coal-fired plants to invest money to keep older, high maintenance nuclear plants in operation in return for continuing to run some of their coal-fired plants. If this does not happen, both types of plants would cease operations with lost capacity made up via construction of new natural gas-fired plants.

Supporters of renewable energy should line up solidly behind the Nuclear Matters group, because an interim step to keep both existing types of plants in operation would be a good stopgap plan to look ahead to the time when wind and solar could arguably take up the slack.

 

 

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Another good thing about shale

images[6]When the Yucca Mountain idea for disposing of nuclear waste was torpedoed by Harry Reid, senator from Nevada, the problem of disposing of 70,000 metric tons of spent nuclear fuel remained unsolved – a sort of “sword of Damocles” hanging over the nuclear power industry and the United States. But Europe is ahead of us in this area as countries like France, Belgium and Switzerland, as well as Canada, have for some time been looking at shale rock as a safe medium for storing nuclear waste- possibly for as long as a million years(!) as an article in the April 7th issue of Chemical Engineering News recently pointed out. Original concerns about leakage in shale formations have now been abated as more studies were carried out. Modelling, including computational chemistry is being used in further work, such as at the Ecole des Mines de Nantes, in France.

 

Shale has some good features, including absorptive clays, which act as filters. Work being done in actual shale beds involve studying the movement of water and pressure patterns in the rocks. It has been found that there is essentially no movement of water, a very positive finding.

A shale repository would be created half to one kilometer below the earth’s surface, consisting of a tunnel of galleries excavated outward like veins in a leaf.  Nuclear waste containers could be stored “for hundreds of millenia”.

Clearly, our nuclear scientists and the DOE will be following these studies closely. According to the article, the Canadian Nuclear Waste Management Organization is planning an underground storage facility that “will be capped with shale”.

 

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