Tag : coal
A new ChemSystems(R) Special Report published by Nexant --Polygeneration from Coal: Integrated Power, Chemicals and LiquidFuels -- analyzes the technologies and economics of producing largecapacity power and co-produced chemicals or liquid fuels from coal.

Advanced coal gasification technologies have raised the efficiencyof coal conversion far above that of conventional coal combustion.As a result, these advanced technologies offer the promise ofeconomically and environmentally acceptable uses of coal forchemicals and liquid fuels.

One of the more promising advanced development concepts ispolygeneration from coal. Polygeneration involves the gasification(or conversion) of coal to produce synthesis gas (syngas) that canbe simultaneously used for the generation of electricity and in themanufacture of chemicals and liquid fuels. This approach offers anintegrated strategy for optimizing the value of coal.

In polygeneration from coal, electricity is produced inconventional integrated gasification/steam turbine combined cycle(IGCC) systems, while commodity chemicals (methanol, ammonia, andtheir derivatives such as olefins and acetic acid from methanol andfertilizers from ammonia) or liquid fuels (methanol, diesel,dimethyl ether (DME), and gasoline) are produced viastate-of-the-art chemical processes.

Since 2006, the unprecedented rise in prices of crude oil and otherforms/sources of energy, along with a range of technology advances,has resulted in a significant favorable change in coal's potentialinvestment economics. In the interim, despite price volatility,mid-2008 prices are still well above those in the first quarter of2008. Thus, we observe that many petrochemicals can now be madevery competitively on a full cost basis by using syngas made viapolygeneration. Polygeneration-based syngas as a feedstock isdemonstrating increasing competitiveness.

Background

The use of coal as a fuel and a feedstock in a technologicallyadvanced facility represents a modern approach to maximizing coal'spotential, exceeding the capability of cogeneration (the previousbest practice) which increased the value of low-grade fuel inrefinery and chemical facilities in the 1980s and 1990s. Coalpolygeneration provides highly flexible and efficient cross-sectordesign and implementation features with numerous benefits: -0- *T-- The gasifier upgrades coal or other heavy hydrocarbon sourcefeedstock, with superior environmental performance -- Because thesyngas produced in the gasification process can be shifted to/frompower generation and chemicals/liquid fuels, it offers inherentpeak period maximization capability for electric power and facilityrevenue optimization -- Sharing the coal handling and gasificationfacilities between power generation and chemicals/liquid fuelsproduction provides both with improved scale and efficiency of thecapital investment and operations support -- This integratedconcept has beneficial economic potential since the syngas producedin the gasifier can have several applications: -- On-purposeproduction of commodity chemicals or valuable liquid fuels -- Aconcentrated carbon dioxide waste stream that can be used for anumber of chemical applications or that can be sequestered -- Powerfor sale to the chemical complex, nearby power users, or amunicipal power grid system *T

Nexant's Findings

The concept of a world-scale polygeneration facility involves alarge number of unit operations dealing with the gasification ofcoal, the IGCC production of power, and the conversion of syngas tochemicals or liquid fuels. The heart of the complex is a gasifierisland, consisting of multiple coal gasifiers and auxiliarysystems. For the world-scale capacity used in the Nexant study, thegasifier island consists of numerous trains producing a total of1,015 MW of power plus 4,600 million NM3 per year of syngas forchemicals or liquid fuels production, based on commercially proventechnologies.

In the study, Nexant developed regional economics for the U.S.,China, and a typical Eastern European/Eurasian location -- forhistorical 2007 as well as forecast 2010 and 2015 coal andfeedstock prices -- and for crude oil scenarios intended to accountfor the future uncertainty of oil availability and price. Based onthe chosen facility configuration and a regional co-product creditfor the net power produced, the economics for chemicals and liquidfuels show interesting and promising results. Several of the moreinteresting chemical and fuel analyses included in the study arehighlighted below.

Technology for the production of olefins from coal has been highlyresearched in recent years. The production of methanol from syngas(from coal gasification), followed by the production of ethyleneand propylene via methanol to olefins (MTO) technology has showngreat promise in coal-rich countries, particularly China. Nexantanalyzed these costs when produced along with export power andcompared them to the production of ethylene from steam cracking oftypical regional feedstocks. The investment and non-feedstockoperating costs of polygeneration facilities are high when comparedto conventional routes (pulverized coal combustion for powergeneration and conventional refining and chemical routes based oncrude oil). Therefore, the economic advantage of polygenerationwill generally increase substantially when one or more of thefollowing conditions have occurred:

-- Crude oil and natural gas prices are high relative to coalprices

-- Conventional feedstocks (crude oil and natural gas) forchemicals and liquid fuels are inadequate to satisfy market demand

-- A market exists such that there would be substantial carboncredits that would benefit the large concentrated stream of carbondioxide from a polygeneration facility (to be used forsequestration or other use of carbon). Note: Nexant's analysis inthis study did not assume or make allowance for any carbon credits

Further, since many of the process steps in polygenerationrepresent fairly new or novel technologies, we believe that projectsponsors and lenders will be seeking to limit their investments inthese projects to opportunities in which the key operation bases ofthe project and expected future cash flows are fairly conservative.In that way, sponsors will limit their risk exposure. Given the keyissue of prices for the commercial prospects for polygeneration, webelieve that, to be developed, projects may need to exhibit strongexpected future financial performance based on prices that areconservative relative to mid-2008 market prices in which petroleumprices rose to unprecedented highs.

To provide analyses of the downside risks that would be faced bypolygeneration projects, the cost comparisons in this study arebased on a combination of 2007 prices and relatively pessimisticforecasts of lower future prices, taking into consideration recentprice volatility, but also acknowledging the long-term history oflower oil and gas prices. The analysis quantifies the risks to thecompetitiveness of polygeneration should energy prices trenddownward toward figures consistent with long-term historical trendsand historical cyclicality for oil and gas prices.

The prospects in the U.S. for the polygeneration route to ethyleneare not encouraging under very pessimistic long-term petroleumprice scenarios. So, while in 2007 the ethylene from syngas routeis relatively competitive with ethylene from steam cracking ofethane, the syngas route is likely to become less competitive whenconsidering the downturn in petrochemical feedstock and commoditychemical prices during the trough years of the petrochemical cycle(arguably in the 2010 and 2015 timeframes) under a very pessimisticoil price forecast.

On the other hand, the polygeneration route appears to be verycompetitive in Eastern Europe/Eurasia throughout the analysisperiod, primarily due to lower coal prices.

There is great potential for the production of liquid fuels fromcoal. In addition to methanol (as a potential fuel), coal can alsobe the raw material for diesel fuel (Fischer-Tropsch liquids), DME,and gasoline.

Nexant analyzed the production of diesel fuel via Fischer-Tropschsynthesis using syngas from polygeneration. Diesel production viapolygeneration is comparable to diesel produced via Fischer-Tropschsynthesis of natural gas in the U.S., at least until the end of2015, although neither route is considered competitive in the U.S.under the long-term pessimistic crude oil price scenario. In China,the cost of production from coal is -- and will be -- reasonablycompetitive with that from natural gas.

A very real potential for chemicals and liquid fuels is as exportcommodities from coal-rich regions. With a polygeneration complexalso supplying a large amount of power locally, the co-producedchemicals or fuels can be exported to other global regions atrealistic and profitable margins. As an example, gasoline producedfrom syngas (using the economics for the Haldor Topsoe TIGASprocess) in either China or Eastern Europe/Eurasia will be verycompetitive in the U.S. market in the estimated 2010 scenario, evenafter accounting for shipping costs. Estimated margins are high andappear to offer excellent investment potential.

Conclusion

Polygeneration from coal offers excellent prospective investmentpotential in coal-rich regions. Nevertheless, although there areimportant issues to be addressed regarding downside scenario risks,there are potentially large returns to be made. Nexant's study onPolygeneration from Coal addresses key techno-strategic issues suchas the expected different competitive cost positions of suchprojects on a broad regional basis and for different products giventwo pessimistic downside oil price scenarios.

For more information on this ChemSystems Special Report, pleasevisit www.chemsystems.com or contact: Ed Glatzer +1 914 609 0325(e-mail: eglatzer@nexant.com).

About Nexant

Nexant, Inc. is a premier global provider of petrochemical, oil,gas, clean coal, biofuel, renewable energy, and intelligent gridsolutions -- developing and delivering strategic, technical,economic, financial, and master planning consulting services tochemical and petroleum majors, Fortune 500 companies, utilities,transmission and distribution system operators, financialinstitutions, government agencies, and development banks. Nexant(R)is a proprietary trademark of Nexant, Inc. The company is owned bya select group of investors and Nexant management and employees.Nexant(R) and ChemSystems(R) are proprietary trademarks of Nexant,Inc.