Siluria, Linde’s M2E partnership: why methane, why ethylene, why now?

June 9, 2014 |

Siluria-pilot

In a world filled with expectations that abundant natural gas will replace coal for power gen, and everyone will build ethane crackers to make ethylene — Siluria and Linde spot a niche in methane-to-ethylene.

Could all that dry gas out there prove to be a bonanza for this biobased technology?

Siluria CEO Ed Dineen visits with the Digest to highlight the new partnership.

News arrived from California last week that Siluria Technologies and The Linde Group will combine the companies’ respective technologies and expertise into an optimized and integrated package which Linde would license to the petrochemicals industry for both revamps or expansions at existing ethylene plants and for new world scale methane-to-ethylene plants.

In other words, transforming a $200 per tonne molecule into the most widely-produced chemical compound in the world (109 million tonnes last year – and rising fast), currently selling for around $1200 per metric ton. Glad Wrap, for example, is the polymerized version of ethylene. Plus, plastic bags, bottles, boxes, containers, pens, and on and on.

Ethylene is so valuable as a chemical, in fact, that its price makes it unusable as a transportation fuel, despite the little known fact that you get about 50 percent better mileage on ethylene than gasoline, and the CO2 emissions are lower (NOX is higher, though).

Now, why do we need a new technology to make Glad Wrap?

Two reasons come to mind: the economic opportunity and the resource challenge.

Frankly, natural gas is cheap and abundant in markets such as the US, and technologists have been scrambling for a couple of years now to develop ways to take advantage.

Secondly, gas is “drying out” in key sources, such as the Middle East, and has been inherently dry in Russia for a long time. The northeast of the Marcellus field: pretty dry; Generally, oil plays and wet gas have received the most attention from project developers and financiers. Dry gas could use a lift.

Siluria's demo plant now under construction, co-located with the Braskem plant in La Porte, TX.

Siluria’s demo plant now under construction, co-located with the Braskem plant in La Porte, TX.

(Note for readers: Natural gas, like martinis, can be “dry” or “wet” — dry meaning “mostly methane”; wet meaning “more natural gas liquids such as ethane, butane, propane, or pentane.  Wet gas is more valuable because of the higher value of the liquids.)

The background

Over the past six months, Linde has completed an extensive technical and economic diligence process on Siluria’s oxidative coupling of methane (OCM) technology, which catalytically converts methane directly to ethylene. The success of this joint diligence effort resulted in the formation of this strategic relationship. The companies have formed joint teams, which will fully integrate the companies’ respective technologies and collaborate through the final scale-up and demonstration of the OCM technology at the Braskem demonstration plant Siluria is constructing in La Porte, Texas. The plant is expected to begin operations in the fourth quarter of 2014.

Siluria’s Hayward ETL facility and the La Porte OCM demonstration plant are the last scale-up steps prior to full commercialization of Siluria’s technology platform, which is now planned for the 2017 time frame.

Next steps with the Linde partnership

The companies expect to be offering the technologies to the broader ethylene industry in the second half of 2015. Siluria is currently engaged in feasibility studies with selected operating companies in the ethylene industry focused on the initial commercial deployments. “For Linde this exciting technology opens new business opportunities and is another contributor to our leading position in olefin technologies,” said Dr. Samir Serhan, managing director of Linde Engineering.

Siluria plans to deploy its technology in a range of commercial settings, including existing ethylene producing plants, at ethylene consuming sites, upstream gas monetization, natural gas midstream plants, as well as world-scale deployments.

Reactions from the Partners

“We are extremely pleased to enter into this partnership. Linde is clearly one of the leading technology and EPC service providers to the global ethylene industry. This partnership strengthens our technology platform and enables a world class go-to-market licensing strategy,” commented Andrea Redford, director of EPC partnering and capital projects at Siluria.

“The oxidative coupling of methane (OCM) has been ranking for decades as the most ambitious innovation target in the field of ethylene technology. Linde is a leading player in this market and is fully committed to work with Siluria at the aim to broaden the feed-stock slate for ethylene production,” said Professor Dr Aldo Belloni, Linde AG executive board member. With more than $22.5B in sales and 63,000 employees, Linde is the largest engineering and gases company in the world.

What’s been the problem with OCM, again?

The problem is that no one has been able to make OCM work on an economic basis – the catalysts just didn’t have the right selectivity or activity rates. After a great deal of excitement and research in the 80s and 90s, attention petered out.

But, inspired by the way nanomaterials are created by nature, Siluria develops metals and metal oxide crystals grown on biological templates. The metals coating the virus form a nanotube structure they refer to as a “hairball”, giving the catalyst a greater surface area, which enhances the reactions, at temperatures 200 to 300 below current steam cracking methods, greatly reducing the energy needed by current technology to produce ethylene.

A conversation with Siluria CEO Ed Dineen

BD: Tell us about the origins of the Linde deal?
ED: We’re been in talks since Q3 of last year, with a full 6 months of due diligence.

BD: What’s most attractive about Linde from a technology point of view?
ED: The opportunity here is to merge their back end with our front end, and clearly Linde are one of the leaders. We talked to the key companies in the field,. like Chicago Bridge & Iron. But it rapidly became clear that Linde had the ability and drive to do it, they were receptive and also had a gas company that was even bigger than their EPC arm, and that added synergy.

BD: How do you keep a gas giant like Linde focused on what for you in critical and for them is a side project?
ED: We worked out a deal, where we are both incentivized to do these projects. The agreements are pretty specific on resource commitments.

BD: How does marketing work. Who takes the lead now, and later?
ED: For now it’s a joint marketing program and we have been able to share a number of leads we have developed. Linde has the global network we can’t afford, and the expectation is that down the line they will assume the front role in marketing.

BD: Lot of activity in ethane crackers. Why methane, why now?
ED: Ethane, yes, there’s a lot of activity, in the US anyway. Some are real, some won’t happen. We’re not going to
be world scale tomorrow with our technology, so those immediate projects don’t affect us directly, as we’re going to be more like 75 kilotons for the first commercial, not not 1000 KT. But our analysis shows that as good as ethane was, methane’s better.

BD: And naphtha?
ED: There’s a huge competitive edge over naphtha. In looking at the three routes to ethylene, naphtha was the worst.

BD: How do the economics compare?
ED: As long as oil is 8x the price of gas, and the higher the better, that’s the rule of thumb for viability.

(Note to readers” with NG at $5 and oil at $100, the differential right now is more like 20X)

ED: Our study found that over the past four years of ethane, NG and naphtha prices, we beat naphtha by $1B per year, and ethane by $250M per year. Now, these are big numbers, but based on big capex projects for world-scale, like $4.5B. The bottom line is with oil $100 and gas at a fraction of that, you have a lot of room.

BD: How easy is it to build out a company based in the Bay Area, given the cost of living and competition for good people?
ED: California and Texas are always a challenge. We are evolving in San Franciscso into a research & tech division, and setting up in Houston for commercial, financial, some engineering. Houston helps us widen the net.

BD: What’s the pitch, to acquire the talent you need?
ED: We’re offering something different, not incremental, most big companies are doing only incremental projects these days.

BD: What’s the latest on the pilots in Hayward, CA and the demon plant in LaPortae, TX?
ED: Hayward is expanding, we’re putting in the 3rd OCM pilot. LaPorte is 75% done, construction on schedule, under budget.

BD: How’s the strategic relationship with Braskem?
ED: Braskem is the host in LaPorte, but the relationship is broader. We’ve been engaged in feasibility work with them to determine if they might be the initial commercial deployment.

The bottom line

Great progress for Siluria.

Next up for the company: completion of its intended $30-$35M cap raise, which was tipped for the first half of the year — and we’ll stand by for more progress with its newly-announced second process technology to convert ethylene to diesel, gasoline and jet fuels.

More on the story.

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