Why Celanese Might Have A Potential Ethanol Breakthrough

Posted on September 27th, 2011 by

Mark Oberle, Senior VP of Corporate Affairs for Celanese, discusses how his company is working to find new and viable options for using ethanol as a reliable fuel source.

Full Transcript:

Ben Lack: Can you give me a brief history about Celanese and the products that your company is focused on building.
Mark Oberle: Celanese is a company that’s been around for almost a hundred years now and we are, as we define, a technology and specialty material company.History of our technology has really been part of our growth as a global company. Today, over 75% of our economic activity happens outside of the US. It’s really all based and predicated on having leading technologies to produce materials for other manufacturers to use. Without getting into the periodic table, so to speak, we produce materials that other people use whether it’s in paints, coatings, adhesives, inks, dyes, engineered thermoplastics, filtration media. We’re a company that has leading technologies to produce our intermediate materials better than used by our customers who tend to be manufacturers of products for use in their innovative applications. That’s who we are and we as a company, beginning about four or five years ago now, we started to look at ways that we could apply our technology advantages into other areas, other materials that we haven’t historically participated in. The first that we are in the process of commercialising is the production of ethanol. And so for Celanese, we looked at ethanol in two ways. One is an application that we’re very familiar with.

Ethanol is used in industrial manufacturing processes around the world, primarily in China, but around the world, as an industrial solvent. It is used in the manufacturer of lacquers and textiles, and pharmaceutical applications and even cosmetics. That’s an application that we know very well because we actually purchase ethanol today and we combine it and process it with other materials to produce some of the products that we sell today. As we were looking at the technology and looking at what we could do with the breakthroughs that our scientists down in Clear Lake, Texas came through with, we also started to explore how this technology could be applied in a global energy environment and that’s where we started to get very excited about some of the potential benefits that we see this technology bringing the energy complex globally. The global energy complex is challenged. In the US, we use 4 out of every 10 rows of corn produced to mix with fuel. Other parts of the world have desires to reduce their dependence on imported energy, reduce the price of their gasoline for consumers, but not to the expense of limited arable land or without putting additional stress on an already constrained global food supply.

As we look potentially applying this new technology to the global energy complex, we see some of the potential benefits that this could bring. Our process technology utilizes any basic hydrocarbon as the primary raw materials or feedstocks. So, think of coal or natural gas, pet coke, even biomass if it’s economically advantaged, can be used in our process. It’s a very efficient, highly scalable manufacturing process to convert these basic hydrocarbons into ethanol. And the economics using the abundant hydrocarbons that are around the world, natural gas, for example, in the US could be coal in China or in places like Indonesia. We can convert this very cost competitively. In fact, advantage versus most other commercially available technologies today.

Ben Lack: Is there a big difference from a price prospective or is it fairly comparable?
Mark Oberle: We use May data for US natural gas or China coal, I don’t think the market has moved too much since May. But we can produce somewhere around a $1.50 a gallon. Or state it in another way, our customers could purchase from Celanese at the equivalent of purchasing or producing gasoline from the equivalent of $60 per barrel crude. Over the last 7 or 8 years, with very few exceptions, when the price of crude oil came down pretty sharply in the end of ‘08, this would make it very attractive to potential customers such as refineries or other customers who would be interested in taking ethanol into the fuel pool.
Ben Lack: Is the secret source is really that you can use any type of a local hydrocarbon as a foundation of this new brand of ethanol? And from a manufacturing standpoint, what did you have to do in order to deal with that flexibility? Are you able to use the same type of equipment regardless of the hydrocarbon or do you have in the mix different types of processes that would handle coal compared to natural gas or something else?
Mark Oberle: Our process technology is built on 30 or 40 years of what we call acetyl chemistry which has been kind of the lifeblood of the company over the last several decades and this acetyl technology lies at the heart of the ethanol technology with a couple of additional breakthroughs that we’ve been able to have. Acetyl technology takes basic synthesis gas and methanol as the primary inputs. We are relatively agnostic as to what material is used to produce the synthesis gas. There are differences in capital cost. Examples could be that coal tends to be a little bit higher capital than natural gas. But, from our stand point, the process technology to convert the synthesis gas is exactly the same. It breaks it down into its basic elements and our process converts those basic elements into ethanol.
Ben Lack: What’s your existing capacity right now for manufacturing?
Mark Oberle: We are in the process in the first opportunity that we pursued is really an industrial use ethanol. The company has laid out a plan over the next three years to add significant capacity into the industrial use market. I’ll give you three data points or three milestones over the next couple of years that the company will target for the industrial use ethanol. The first is the middle of next year. So, the middle of 2012, we will complete a technology advancement unit in Clear Lake, Texas. So this will be a smaller scale unit used primarily to create and work on the next generations of the technology. The middle of 2013, we intend to construct and begin producing a 200,000 ton industrial use ethanol complex at our existing facility in Nanjing, China and we’re continuing to pursue one and perhaps two green field units also in China. Half of the world’s demand for industrial use ethanol is in China. It’s growing at 8 to 10% per year based on the applications that it supports. Our initial strategy for industrial use has been to capture that growth.
Ben Lack: When you say industrial use. What types of applications are we talking about?
Mark Oberle: Think here of lacquers, dyes, textiles, inks, pharmaceuticals, other coatings. So, it is used as a solvent, basically in layman’s terms, it helps you apply a surface or a coating and then evaporates and dries. Our intention by 2015 or 2016 will be to have somewhere between a million and 1.5 million tons of capacity installed in China to support this market.
Ben Lack: Why does China have such a strong appetite for Ethanol?
Mark Oberle: Two reasons, in the industrial use, if the applications that they manufacture the products that China is growing with that drives the demand. So, think of textiles which used to be very North American-oriented now is more China and Asia. Manufacturing of furniture for example, is another application that consumes a fair amount of ethanol. So it’s the applications that China is growing, based on the growth of their manufacturing base. That’s what drives the use in the industrial market but now we seek countries such as China as well that we think meet the 3 criteria for the growth of fuel demand. The first is that they have a rich abundant supply of local economically attractively priced hydrocarbons. China tends to be coal. Second, their government has a desire to reduce their dependence on imported energy. And three, they have a government that practices policies of what I would call feedstock and technology neutrality. That is there is not a pre-determined or pre-ordained technology that will have unlimited or uncompetitive access to a market.

As we talk to potential customers in places like China or India, Indonesia, Australia, their significant interests not only by the governance but by the refinery that companies that own the refineries in those countries. In this technology as a way to bring ethanol into their fuel supply as an oxygenate, reducing tailpipe emissions and all the other benefits of using an octane enhancer like ethanol. But, it also provides more energy independence, more security of supply at an economically advantaged cost position that allows them to benefit financially as well.

Ben Lack: Can you give me your assessment on what the current ethanol environment here is in the US?
Mark Oberle: The first 15 billion gallons of demands for ethanol in the US is a monopoly for corn based ethanol. There has been growing concern and frustration over that, lack of advancement in the technology as they said 4 out of every 10 rows of corn going to support fuel needs in an environment where food prices are rising, price of oil continues to increase and the technology is not advancing at the rates that were anticipated when the RFS was created. So, you’re starting to see some frustration with that whether it’s the vote that we saw, that was looking to end the subsidies, the $68 billion a year the government is paying for the technology to be cost competitive or growing concerns about the lack of advancement in the technology where some would argue we actually consume as much energy to produce the ethanol as the ethanol uses or produces. We’re net-neutral in our energy independence argument.

We believe that this technology brings a commercially viable, technologically proven, and ready now, technology that we could use some of the resources here in the US. Natural gas is probably the most preferred at this point. But, as a way to convert natural gas into liquid fuel and to an environment that is already consuming methane perhaps as much as E15 as we move forward in a way that is incredibly economically advantaged. Not only do we not need subsidies to be cost competitive but we would be even more economically advantaged versus the existing technologies out there even if those subsidies continued for them and not for us. We like our technology. We believe it should be part of the portfolio of options and alternatives that the US uses to meet our energy demands but unfortunately right now, legislatively, we can’t participate.

Ben Lack: I’m curious to know why you’ve chosen work on this ethanol issues and why have you chosen to spend your time working for Celanese.
Mark Oberle: I think it’s a potential game changer in our industry as well as outside of our current industry within the global fuel market. It is a technology that is new to the world but is built on the backbone of what we’ve done very well for the last couple of decades. With that, it provides a price point, the environmental advantages and the scale advantages that we believe our potential customers in the fuel space could really use to help address some of the energy issues that are facing the country today.

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