METHANOL IS PRO CHOICE

April 27, 2012 § 8 Comments

Methanol is pro life as well, the good life.  Lower cost driving that is relatively immune to gasoline price run ups and lower emissions to boot, now that is living well.  Add to that the fact that in the production of methanol we have choice of starting raw material.  Unlike ethanol, that other alcohol, methanol is easily derived from a host of carbonaceous materials other than natural gas.  So it is not subject to price volatility, as for example was ethanol, to the vagaries of corn prices.

As we have discussed previously, flex fuel vehicles capable of running any mixture of either alcohol or gasoline would afford consumers choice.  The E85 experience was not all positive because ethanol prices without subsidies were relatively high in the US.  Brazil, with its low cost sugar cane derived ethanol is a different story.  Now with the disappearance of the import tariff on ethanol, perhaps Brazilian ethanol will be viable here.  But ethanol from biomass still suffers economic hurdles.  So, the choice of feedstock in this country is pretty much limited to corn.  Other crops such as sweet sorghum have not yet become viable.

Methanol on the other hand is very simply produced from natural gas, coal, petroleum coke or woody biomass, pretty much in order of ascending cost to manufacture.

This chart was derived by RTI engineers for a typical methanol plant producing 5000 tonne/day.  Plants double or triple that size are also not uncommon.  Costs at such plants would be comparable.  At April 2012 prices methanol could be produced for about 30 cents per gallon.  Add to that typical distribution costs and taxes of 30 cents.  Then double that for gasoline equivalence because methanol has half the energy content of gasoline.  We come up with methanol costing roughly $1.20 at the pump on a gasoline equivalent basis.  Compare that to regular gasoline today at about $3.80 per gallon.  Do keep in mind, though, that with today’s low compression car engines the methanol tank would be roughly twice the size of a gasoline tank, or you would simply have to refuel more often.  This would be a part of the consumer trade off.  As reported in a previous blog posting, high compression engines could eliminate that penalty.

But natural gas pricing today is abnormally low in large measure due to the warm winter.  A more normal price would be the October 2010 price shown in the figure.  That would put methanol at the pump at about $1.60 per gallon, still a steep discount to gasoline.  Looking out further, we forecast the ceiling for natural gas pricing as shown.  This has support from the study by Amy Jaffe and colleagues at the Baker Institute in Houston, who used different methods.  At the upper end of the range we could expect methanol at the pump to be $2.30 per gallon.  The likelihood of gasoline dropping to those levels in the foreseeable future is extremely remote and episodic at best.  All forecasts of oil prices are well into three digits and not the sub $70 per barrel they would have to be to get gasoline to break even with methanol.  We are forced to conclude that methanol will be cheaper than gasoline on a miles driven basis for decades.

That leaves the question of whether natural gas supply will keep up with the demand.  The concern is valid to some degree because of the expected massive displacement of coal as a fuel for electricity production.  Add to that the expectation of rapid expansion in other chemical industry segments such as fertilizer production.  Finally, export of liquefied natural gas (LNG) will certainly be in play.  LNG adds between $3 and $4 to the cost of a million BTU, the position in that range depending upon how far is the delivery point.  Even with that mark up, gas at prices shown in the graph will be profitable for delivery to countries such as Japan and India, who are currently paying over $12 per million BTU.  Such export is being resisted by the US chemical industry because of worries of price escalation, so it may well not happen.  Said industry is enjoying a windfall at current gas prices.  Anhydrous ammonia sells for between $600 and $800 a tonne.  The raw material cost of that at April 2012 natural gas prices is under $60.  That is the definition of profit.

Methanol from coal can be expected to cost about the same as natural gas at the upper end of the range in the figure.  For this computation we take $25 per tonne for the low grade coal at the mine mouth.  High grade coal at $150 per tonne would be out of the question and unnecessary.  Petroleum coke is a bi-product of heavy oil processing and has very low value.  But it is very high in carbon and extremely low in ash.  It can, however, have high sulfur and heavy metals.  These last are manageable.  One could expect methanol from petroleum coke to be just a bit higher than from low grade coal.  All of these are still very competitive with gasoline.  Finally there is biomass.  The lignin content of some woody biomass is particularly deleterious for ethanol production.  But thermal processes used to make methanol are not bothered by that aspect.  The costs would be higher than for the other sources discussed but further research could bring that down.

In summary, methanol offers consumers of transport fuel a viable low cost choice.  Producers will have choice with respect to raw materials, with natural gas currently being the low cost winner.  But in the future, a significant portion could be from poorly utilized resources such as low grade coals and petroleum coke.  Finally, renewable sources such as woody biomass could be made economically viable.  The only loser in this scenario will be imported oil.  If tempted to drink to that, make sure it is ethanol.

Vikram Rao

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§ 8 Responses to METHANOL IS PRO CHOICE

  • Bob "The Clean Energy Guy" Mitchell says:

    Once natural gas becomes any significant portion of the transportation fuel mix, ng is going to go back up! Add that to the use of ng for additional base load electricity and exportation and we’re going to be right back where we started, if not higher for ng prices.

    Factor in the fact that fracking for natural gas uses 1.5 million gallons of water per well, as well as has the risk of aquifer and well contamination, not to mention possible seismic consequences and I wouldn’t bank on cheap natural gas for more than a couple of years.

    Biomass offers some hope, but only after gasoline goes up enough to make it more economically viable. I do have a question though, has anybody looked at industrial hemp as a possible source of the biomass? If so, how did that stack up?

    Bob “The Clean Energy Guy” Mitchell

    • rtecrtp says:

      In my book entitled Shale Gas: the Promise and the Peril, scheduled for publication in June by the RTI Press, I propose that shale gas can be produced with zero fresh water usage. I also present both sides of the debate on the potential for contamination.

      As to NG price rises, while I think rises above $8 per million BTU unlikely, that is precisely the allure of methanol: choice of raw material. Hemp being an existing industrial commodity may not compete on price, but I dont see any technical reason that it is not viable as a methanol feedstock. someone else could weigh in on that.

      Vikram

      • Bob "The Clean Energy Guy" Mitchell says:

        Vikram: I look forward to reading your book! I have to say though that I remain skeptical about the safety of fracking. While utilizing grey water, which is what I’m guessing that you are suggesting??, is an improvement, it doesn’t go anywhere near far enough towards addressing fracking’s other issues.

        Even if it’s grey water that is used, it will still migrate back to the water table and if it does so too quickly, the particulate matter may still not be filtered out of it and the dissolved toxins are still going to be present.

        Then there is the issue of fault line lubrication and it’s role in causing increased seismic activity. One fairly minor earthquake in the wrong area could wipe out any gains that society would have recognized from allowing the process! Now, that’s not enough to stop the gas companies, but the threat should be enough to stop society from allowing the process!

        Bob “The Clean Energy Guy” Mitchell

  • John Petersen says:

    There are some pollyana sorts who think you can get ethanol from cellulosic plant fiber instead of corn. In Tennessee, corn has to be saved for moonshine. Let switchgrass do the dirty work.

  • Your comments about the potential of methanol as a transportation fuel are very interesting in light of a recent talk I attended by Cory Johnson from Exxon. He was basically going over Exxon’s “The Outlook for Energy”, and it was very interesting that he was rather dismissive of natural gas for use in big rigs as per the Pickens Plan. The argument was that while it was cheaper, it could only go 1/3rd as far without major retrofitting of the truck. His illustration of this was rather convincing, with the tractor unit adding on some really serious volume for the tanks. CNG could still be competitive, but if they don’t have the same range, then the price differential also has to make up for the additional driver’s time and logistical complications.

    Also on that point, for whatever reason, Exxon only predicts CNG + LPG vehicles to be 5% of the fleet by 2040, while expecting much larger growth in hybrid vehicles. They argue that a hybrid costs $1,500 more while a CNG vehicle will be $4,000 more. Is this consistent with your knowledge?

    I look forward to your book. It is quite timely.

    • rtecrtp says:

      Yes the Exxon numbers are correct for the present. Compare the price of the Honda Civic regular and CNG versions. But I am not sure why this ought to be the case and will likely change.

      Methanol will run on a flex fuel vehicle with small changes to the elastomers used. So that is in the range of $200 overall, much less if you already had an FFV. With the fuel that much cheaper per mile, the consumer has the choice of filling up more often for cheaper and cleaner fuel.

      Vikram

    • Bob "The Clean Energy Guy" Mitchell says:

      Alan: According to a paper published by NREL (http://www.nrel.gov/vehiclesandfuels/fleettest/pdfs/31227.pdf) after a 4 year study conducted on UPS vehicles, the energy deficit of cng vs. diesel only came out to be between 10 and 15%, not 1/3.

      Also, I did some research online (nothing scientific) but it seems that the average long haul trucker stops for restroom breaks every 3 hours or so, which is well within the range of the cng vehicles. So, while it would still take longer to fuel the vehicles on an average trip, this could be compensated for by designing bigger tanks.

      It is interesting to note that UPS recently went ahead with the purchase of 48 cng long haul trucks. Now, these trucks were basically custom made and were much more expensive than a regular diesel powered long haul truck, they are still expected to pay for themselves within the 10 years that UPS expects to own them. Also, the cost should come down as more of these trucks are ordered.

      As I mentioned in my previous comment, I’m not a big fan of cng vehicles in that I don’t think that ng will remain cheap for very long and I’m not a fan of the fracking that is what is making this gas so cheap either. However, I think that it’s way too soon to say that cng for the trucking industry is dead. Maybe that was a bit of wishful thinking on the part of the oil company!

      Bob “The Clean Energy Guy” Mitchell

  • Carlos Ygartua, Senior Member SPE says:

    What is effect of Methanol on Diesel Fuels and Avgas? Interesting to know % total Domestic and Imported crude is refined and consumed by Aircraft and Diesel broken down by Military vs Civilian use.
    Thank you,
    Carlos Ygartua

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