New, Middle West cracker breaks the mold

images Last week The Joseph Priestley Society of Chemical Heritage Foundation in Philadelphia hosted a luncheon and a speech by Fernando Musa, head of Braskem USA, which is now the largest polypropylene producer in the Americas. The most interesting part of the speech was the description of a new ethylene plant that will shortly be constructed by Braskem near Parkersburg, West Virginia in the heart of the wet” Marcellus Shale gas region. Shell Chemical is also planning an ethylene complex in this region – to be built most likely near Pittsburgh.

Braskem is a Brazilian company that dominates the petrochemical industry in its home country, but also has extensive investments in the U.S. and Europe.  Brazil’s Odebrecht group and Petrobras, Brazil’s national oil and gas producer, own large percentages of the company, which also has public shares.

Some early U.S. crackers  were built in the 1950s in Iowa and Illinois when the first  pipelines were constructed to bring Gulf Coast natural gas to the Middle West. Since this gas had a BTU value much higher than 1000 (i.e.  containing ethane, etc), so-called straddle plants were built to extract ethane and propane from the gas to bring its heating value down to the desired range. The recovered LPG then made a perfect feedstock for producing ethylene. But after that time, essentially all new crackers were built on the Gulf Coast, using either ethane/LPG of naphtha and heavier liquids as feedstocks.

For a long time, the U.S. had a strong competitive advantage in petrochemicals, as described in Michael Porters 1990 book (“The Competitive Advantage of Nations”). Our advantage fit Porter’s model, which was based on Demand Conditions (large domestic market), Related Supporting Industries (A local “cluster of suppliers, universities, contractors, etc), Industry Structure Rivalry (strong competitors constantly improving operations) and Factor Conditions (primarily favorable raw material and energy costs).

By the late 1990s, natural gas prices on the Gulf Coast had risen sharply and naphtha became the worldwide feedstock , with the U.S. losing its competitive advantage. Then, as we all know, it regained the advantage as low cost dry and wet shale gas became abundant a few years ago. With that background, let’s look at Porter again with respect to the prospective new crackers in the Middle West:

Demand conditions: Similar, but slightly better as demand for petrochemical end products is more concentrated in the Middle West than on the Gulf Coast.   Related Supporting Industries: Less favorable. The interconnectedness of petrochemical plants on the Gulf Coast was highly important to non-integrated downstream producers, who could source ethylene or benzene from a number of suppliers using existing pipelines. Also, contractors were quickly available for shutdowns and turnarounds. Barge, rail and container ships were at hand to allow efficient supply chains. Industry Structure Rivalry: No longer important as leading worldwide competitors all use the best technologies. Factor Conditions: Favorable.  Shell will enjoy the full benefits of being back-integrated into the Marcellus shale gas. Braskem will obtain well-priced ethane from local suppliers and, while less competitive than Shell, will still have a worldwide competitive advantage. It may have the opportunity to back-integrate by acquiring a fracking company.

Interestingly and not surprisingly, Musa said that he hopes that Shell will also move ahead with its project. Having two producers in relative proximity, no doubt enhancing the growth of a Midwest petrochemical “cluster” moves in the direction of guru Michael Porter.

 

 

 

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First big carbon capture project moves ahead

imgres My January 8th post illustrated a combination of carbon capture from coal-fired power plants with enhanced oil recovery from depleted oil fields using the recovered carbon dioxide. With a scheme like this, the considerable cost of extracting carbon dioxide from power plant flue gases is justified when the carbon dioxide is pumped to a nearby oil field for additional crude oil recovery(tertiary recovery) as the CO2 pushes out some of the remaining oil left in the ground from conventional drilling plus water flooding (secondary recovery).

C&EN’s September 1st issue details a first-of-its kind project as described above. NRG Energy Corp. and JXNippon Oil & Gas Exploration plan to divert about a third of the flue gases  from NRG’s 610MW coal-fired power plant near Houston, Texas to a carbon dioxide scrubbing and recovery plant using an amine solvent system developed by Mitsubishi Heavy Industries. The carbon capture plant will cost $ 1 billion, financed jointly by the partners and by the Department of Energy, and will capture 1.6 million tons of CO2. This will be piped 80 miles to a relatively depleted oil field, where the current production of 500 barrels per day is expected to increase to 15,000 barrels per day which at $ 100/barrel would generate annual gross revenues of 540 million dollars.

The scrubbing technology was piloted by Mitsubishi at a pilot-scaled plant adjacent to a large coal-fired power plant near Mobile, Alabama.

Adding a carbon capture system (there are different kinds) to a coal-fired power plant is economically costly due to the so-called parasitic load of the capture system, which substantially decreases the efficiency of the power plant when the electricity generated is used to operate the capture system. In the case of the NRG/Nippon Oil plant, a separate 75MW natural gas-fired power plant will be built to run the capture system rather than decreasing the net electricity output of the coal-fired plant.

Since the economics of the proposed installation appear to make sense, we should see several other installations of this kind moving ahead. While some of the CO2 from tertiary recovery does escape to the atmosphere, this does not greatly detract from the fact that such combined systems can greatly decrease CO2 emissions, a stated goal of the Obama administration.

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Shale gas-based ethylene boom: Future planning is essential

images[9] The availability of cheap ethane (best ethylene feedstock) from shale gas and from new, light crude oils has resulted in boom times for the U.S. petrochemical industry. From a position of relative lack of competitiveness, U.S. olefin plants are now the low cost world producer with similar economics to Middle East plants that, however, must ship products to distant markets. Both U.S. and foreign companies are investing huge amounts of money  in new plants here, with eventually far more capacity than can be absorbed by the U.S. market. But in the meantime, profits are incredibly high as domestic producers sell into a world market where prices are set by marginal producers in Europe, China and elsewhere. So, where do we go from here?

Accenture has just released an interesting report entitled “Exploiting Big Bang Disruption in the Chemical Industry”, partly based on a book by Larry Down and Paul Nunes on their “big bang disruption for industries” theory.  For people familiar with the history of the ethylene/petrochemical industry the concept makes sense, though we favored a simpler model that roughly went (1) demand growth, (2) supply constraints/high profitability), (3) overinvestment and (4) unprofitable period (Example (1981-1986) (1987-1989) (1988-1991)(1991-1994). This type of cyclical behavior was the norm.

Accenture says that U.S. petrochemicals are now in the high profitability/overinvestment mode (see chart taken from Accenture’s article) and face a “bust” whose consequences can be mitigated with good forward planning and unusual customer relationship management. But, in addition to overinvestment, there will also be another factor, namely increasing availability of cheap shale gas and ethane in different parts of the world (e.g. Europe, Mexico, China) exacerbating the inevitable U.S. overcapacity situation, as ethylene producers in those countries match our economics.  SharkfinSo, what should domestic companies do when the “sharkfin” bonanza is seen to end a few years hence? Accenture’s recommendations make a lot of sense. Firstly, with huge capacities( about 1.6 times the demand in the domestic market), companies must now focus much more on exports rather than traditionally seeing exports as incremental sales. They should form alliances with shipping companies and foreign customers to develop strong, permanent relationships while foreign competitors are still not a problem. This should go beyond normal sales agreements, and should, for example, include technical assistance, including application development with high value customers who will then depend on their U.S. supplier for more than product offtake. Permanent or semi-permanent linkages should be sought,

The “crunch” time for pricing collapse may come around 2020, so its a longer cycle than before. This should give the more forward-looking domestic firms time for some realistic long range planning.

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Unusual forms of carbon: Growing Commercial Uses

Scan Richard Smalley’s team’s discovery of Buckyballs( Fullerene) at Rice University in 1985 was a breakthrough in the knowledge of so-called allotropic forms of carbon. Thirty years have now gone by, but commercial applications of these interesting shapes of carbon are still hard to find. Not so for carbon nanotubes, a cylindrical form of fullerenes and for graphene, arguably the most important form of allotropic carbon other than diamonds.

Carbon nanotubes are cylinders of one or more layers of graphene. This is an extreme thin transparent sheet of carbon which is 100 times stronger than steel and an excellent conductor of heat and electricity, first produced in 2004. Graphene is a honeycomb lattice of carbon atoms. images Because of its atomic structure, graphene is the most reactive form of carbon.  It generally needs to be bonded to another material (nickel, copper, iridium) to make it usable. Graphene is a superb conductor of electricity, supporting current densities 1,000,000 times that of copper.  Graphene’s large surface area and other properties make it an ideal candidate for manufacture of medical devices, electronics, ultrafiltration, structural materials, battery energy systems and photovoltaics (displays). Batteries, in particular, could benefit hugely if certain problems can be overcome: Graphene-based batteries could be charged much faster than current lithium ion batteries (minutes instead of hours) and with greater storage capacities.While the current market for graphene uses is only around $9 million, estimates of billions of dollars have been forecast if graphene’s promise for electronics and batteries is realized (!).

Carbon nanotubes, which have been exploited for some time now, are used as electrically conductive fillers in plastics, for various painting applications in automobiles, in composite wind turbine blades, in inks, as a filtering medium (e.g. for desalination plants), in anti-fouling paints for boats, as transparent conductors and in anti-ballistic vests. With similar but enhanced properties as carbon fiber, carbon nanotubes are now used in composites for bicycle bodies and tennis rackets.Current world capacity for carbon nanotube applications reached five thousand tons in 2011. But graphene is considered a much greater technological breakthrough, in part based on the much larger number of graphene patents issued.

Graphene-based storage of electricity could be the “holy grail”. Previous posts on this blog have discussed the growing need and use of different types of electricity storage to smooth out the intermittent production of power by wind and solar energy. Could graphene provide a useful answer?

 

 

 

 

 

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NAFTA can work both ways: Mexico starts to privatize energy

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The North American Free Trade Agreement, now over twenty years old,  has been very good for Canada and, even more, for Mexico with both countries’ enjoying highly favorable balances of trade with the U.S.  Mexico is increasingly replacing China as a source of our imports, since the cost of Chinese labor keeps increasing and the proximity of Mexico provides the advantage of lower freight costs and quicker delivery. But a very recent development in Mexico will now become a boon to U.S. energy and related companies, which are already transporting and selling huge amounts of natural gas to our neighbor South of the border. This may help to quiet some of the people here who have been opposed to NAFTA from the start.

After almost eighty years of inept management of Mexico’s vast hydrocarbon resources, the country’s senate last month voted to allow outside companies to participate in the exploration and production of natural gas and crude oil. Readers may know that President Cardenas in 1938 expropriated Standard Oil and other U.S. oil companies’ assets and denied outside oil companies the right to operate in Mexico. Petroleos Mexicanos (Pemex), the country’s national oil company, at that time received the monopoly to explore for, produce, refine and distribute hydrocarbons. A combination of lack of expertise and corruption has seen Mexico’s output of oil and natural gas fall sharply, with oil output decreasing almost a third over the last ten years and refining capacity unable to meet refined fuel demand, causing Mexico to import gasoline.

A particularly dire situation on natural gas may have speeded the process of liberalization. While doubling its spending to $ 20 billion on trying to increase crude oil production, Pemex chose to neglect investment to enhance production of natural gas from the world’s sixth largest natural gas reserve (545 Tcf).  With its economy booming, in part due to steadily increasing exports to the U.S. and elsewhere, natural gas demand rose rapidly, leading to huge imports of gas from the United States. When these flows of gas reached the limit of pipeline capacities, Pemex started buying LNG at $ 19.45 per million Btu (!)

The new privatization directives  Pemex will partner with private foreign companies, with profit-sharing agreements, production sharing agreements and licenses. Ownership of the resources will stay with Pemex. The reform will also liberalize production of electricity in Mexico. Both Pemex and Mexico’s Federal Electricity Commission will be transformed into “productive state companies” with control over their budgets.  This will allow them to act more like corporations and become more competitive. The private sector will now also be allowed to build, operate and finance electrical transmission and distribution facilities.

With Mexico now anxious to greatly increase its oil and gas production, U.S, companies i9nvolved in exploration, drilling, production and transmission will soon start to export various kinds of equipment to Mexico, creating jobs on both sides of the border.

 

 

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3D Printing comes of age

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This blog is about chemical and energy developments of interest to me and, I trust, also to readers following these posts. Since I have wondered for some time about how 3D printing works, I decided to investigate and this is the result. (Full disclosure: this post is largely taken from an article about the same subject I recently wrote for the Scarsdale Inquirer, my hometown newspaper.)

The most important thing to know is that 3D Printing is an “additive” technology used to produce a very large variety of objects that are currently made in a traditional manner from many different materials. Thus, objects now made from metals like steel, brass, or aluminum or from wood or marble start as a block and are cut, machined or chiseled to form the desired shape .This is termed  a “subtractive” technology, where material not wanted is removed to create the desired object. Other items may be made using a mold, but the mold itself is made using “subtractive” technology. The 3D printer (which really isn’t a “printer” at all)  is a machine controlled by specialized software that is coded to lay down successive, additive microscopically thin layers of rapidly solidified or solid material that represent “slices” of the object that is being produced in an “additive” manner.  The software is created with a computer-aided design package or with a 3D scanner. The material used to feed the printer is called the “filament”.

Imagine making a tapered vase with base using a 3D printer. Thinking in two  dimensions, you would see (if you could look into the machine) that the first material laid down by instantly solidifying polymer is a small circle (the base) that rapidly rises to a quarter inch or so in height as successive hypothetical horizontal “slices” are added to form the base of the vase. Then, even smaller hollow rows of circles start to build, expanding as the object rises a number of inches to form the tapered vase. This, of course happens with great speed. Voilà, a vase made by 3D printing!

Such a vase could have easily been made with a mold, but as shapes become more complex, molds become more difficult to design and 3D printing overcomes this problem.  Change the example to a pitcher with handle. The software will faithfully copy the two-dimensional image and build up the handle as part of the pitcher as it directs the “printer” to add the successive layers of the handle part now part of the “slice”. That is how 3D printing can be used to make complex objects.  3D printing can produce an extremely complicated metal part that is almost impossible to make with subtractive technology, which would usually include some welding.

A great variety of 3D printing processes have been and are being developed, using a large variety of materials.  Stereolithography is a laser-based process that works with photopolymers, laser-sintering and laser melting works with powdered materials, (including metals), fused deposition modeling uses extrusion of thermoplastic materials and material jetting is a technology somewhat similar to the way ink jet printers work. That technology allows simultaneous deposition of a range of different materials. An important point is that for most of these technologies, materials, and applications some post-processing steps are required, including curing, sanding, polishing, and painting. Plastic resins such as ABS, polylactic acid and nylon are currently the most common materials used.  But they also include titanium and cobalt chrome alloys, aluminum, metal and ceramic powders, etc.

An important advantage of 3D printing versus subtractive manufacturing processes  is that in the additive process no material is wasted, while in the subtractiv process up to 90 percent of the original block of material may be wasted.

3D printing is an “enabling technology that drives innovation while being a tool-less process that reduces costs and lead times”. More and more applications are being developed for various industries. Examples include hip and knee implants, hearing aids, orthotic insoles for shoes, surgical guides for specific operations and jewellery(e.g. glass fiber-filled nylon), food and the fashion industry(mannequins, face models, shoes, hats, bags). The aerospace industry has been an early user of the technology with GE  (turbine parts), Airbus, Rolls Royce and Boeing  high profile users to make first-of-a-kind parts. Car companies are also early adopters of 3D printing technologies. A drivable prototype of an electric car has been 3D printed(!). Another excellent application is making spare parts for cars, appliances, and other consumer items that are old and out of stock.

Mass customization and competition will make the cost of 3D printers, filaments and software come down fairly rapidly. At a reasonable cost, it will be a fun thing to have around the house.

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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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