Ethane vs methane, carbon storage vs carbon use: which are the bad trades?

June 24, 2014 |

ken-phelpsShould we be looking to methane for vehicles, or ethane?

Should we be looking to carbon storage or carbon use?

Are the modern orthodoxies leading us in the wrong direction?

It’s summer now in the northern hemisphere — the high season for sports. As any fan of any game will tell you, perhaps the only thing more unhappy for the fans than a bad game or a rough season is a bad trade.

In 1988, the New York Yankees traded Jay Buhner for Ken Phelps, and Yankee fans still bristle when you mention it. Phelps would go on to play just 131 games for the Bronx Bombers, hitting just 17 home runs and batting .239. Buhner would go on to play 13 seasons and rack up 310 homers for the Mariners.

In the energy business, you meet a lot of traders — some are among my closest friends and relatives, and they hate bad trades even more than some people hate Mondays, or the rain, or the Macarena. They dwell on them.

But bad trades are always with us — because they are bad ideas that look like good ideas at the time, or seen from a narrow perspective, or seen from the wrong set of expectations.

Two bad trades

Two bad trade ideas going around these days in the energy business are:

1) The idea that sequestering CO2 emissions from power-gen is a better deal than using the CO2 to make useful products.

2) The idea that using methane for energy and ethane to make ethylene, is a better deal than using methane to make ethylene and ethane as a fuel.

Those are both popular orthodoxies. Challenging them, you might find yourself on the outs with powerful interests. In its draft rule-making on CO2 emissions, the EPA has embraced carbon storage as the preferred method; while you only have to google “ethane cracker” or “CNG” to see all the proposed activity around shale gas. But let’s see if there are reasons to re-think those trades.

Ethane vs methane

Lindsay Leveen, who was best known as the technologist behind the Itz a Gaz duel-fuel system, which proposed some years ago to supplement gasoline or diesel with a methanol fuel supply as path towards radically improved economy and performance has lately been blogging as The Green Machine. He proposes that ethane, rather than methane, is the right fuel to focus on in this era of shale gas surpluses.

The reasoning is simple. He writes:

“Ethane is the step sister of the other natural gas liquids propane and butane.  It is also the step sister of methane in pipelined natural gas…The USA is actually swimming in ethane.”

Decrying ethane-to-ethylene crackers, he adds: “More plastics are not what the world needs!   Other companies are lining up to cryogenically liquefy and transport ethane to far off lands in Europe and Asia in specialty LNG type cryogenically refrigerated ships.  This is also a waste of our ethane resource and an expensive and non-green option to deal with the glut of ethane.”

Ethane liquifies at a fairly low pressure, he notes. “Many more BTUS of fuel can be stored in the same volume of cylinder compared with CNG.  Compared with LNG there is much less logistical and infrastructure hassle.”

As a fuel? Liquid ethane has 70% more BTUs per cubic foot than methane, and is low in sulphur. It releases less CO2 than gasoline, and you get twice the range with liquified ethane then methane.

Cost? On a per gallon basis, you half the fuel energy content of diesel, but it trades for roughly 30 cents a gallon. So, think 60 cents per gallon for diesel-equivalent miles.

What about alternative uses? Leveen writes: “Companies are considering projects to covert ethane gas to liquids by reforming the gas and then synthesizing methanol, DME, gasoline, or diesel from the synthesis gas produced in the reforming. This is massively capital intensive and wastes over half of the energy content of the gas with large amounts of CO2 being emitted due to the low efficiency of the gas to liquids synthesis process.”

Starting where? Leveen proposes railroads. “Railroads have investigated and considered LNG but the logistics and costs of a cryogenic fuel are simply too high.  It is very simple and easy for a train to have several tube trailers of ethane on flat bed carriages behind the locomotive that supply the ethane fuel to the locomotive for the long haul propulsion of trains.  For shunting and rail-yard work the locomotive could easily be fueled from a single tube trailer on a carriage behind the locomotive.”

Potential? Leveen says that there are up to 250,000 barrels per day of ethane now being reinjected or flared — roughly 2% of the US fuel supply on a volume basis.

What about methane?

In California, a company called Siluria is showing us what to do with the methane. Rather than compress it into CNG, why not make ethylene, far more cost effectively than a naphtha or ethane cracker can do it?

Siluria’s oxidative coupling of methane (OCM) process technology is believed to be the first commercially viable process to directly convert methane to ethylene. Siluria’s second process technology can convert ethylene to liquid fuels such as gasoline, diesel or jet fuel. This potentially enables natural gas to replace petroleum as the worldwide basis for drop-in fuels, chemicals and plastics.

Siluria CEO Ed Dineen told the Digest. “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.

“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, Member of the Executive Board of Linde AG.

Carbon capture and storage vs carbon capture and use

There’s really nothing to dislike about carbon capture, except that it is expensive, prohibitively so in sevreal key cases, and it may never pay off.

ICON2 reports that the CCS costs between $70 and $250 per ton, depending on the system employed. But retrofitting natgas plants for CCS is the $250 per ton figure, and they don’t even speculate on the cost of retrofitting coal-fired power plants.

But, let’s consider the case of carbon capture and use. Say, to make algae, which can be processed into feed, fuel, food or pharma products as well as useful chemicals. In that case, the storage cost is absorbed by the algae processor.

So, why isn’t everyone embracing that option? Two reasons.

1. CO2 mitigation for power gen using CCS essentially requires rebuilding the power-gen infrastructure. Good news for people who construct power plants in regulated states where the costs are recovered, with a tidy profit, by passing along the cost to the unsuspecting consumer via crazy-complicated power bills. For a 200 MW coal-fired plant running half the time, that’s roughly a million tons of CO2 per year, or $250M+ in extra expense for consumers.

2. EPA has taken the view that storing carbon in algae is only delaying emissions, rather than eliminating — an algae fuel would release the CO2 when burned. Where the storage in that?

It comes down to the avoided use. You see, a gallon of algae-based diesel replaces a gallon of fossil-fuel based diesel, which does not then, necessarily, have to come out of the ground in the first place.

Counting carbs

Think of it this way. If you burn a year’s global supply of natural gas, coal and petroleum and store the natgas and coal CO2, you are venting petroleum fuels CO2, and swapping a whole bunch of sequestered natgas and coal for sequestered CO2.

By contrast, if you burn a year’s global supply of natural gas, coal and petroleum and used all the natgas and coal CO2 to make algae, you are venting petroleum and algae fuel CO2. But you are saving petroleum for a future use, and your overall CO2 use is the same as it was with carbon capture and storage. Plus, you save the costs associated with carbon capture and storage.

The Bottom Line

Orthodox solutions are just that — the accepted wisdom, not always the best ideas available.

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