Methanex Corporation is one Canadian company that might suddenly find itself playing a leading role in the energy scene of the early 21st century. Vancouver-based Methanox is currently the world's single largest manufacturer of methanol.
The world needs energy – plenty of it is needed now, and a lot more will be needed in the future. Energy is necessary for growing our food, for manufacturing and distributing products, and for providing the services that we need for our survival. Energy also allows us to maintain our “modern” mass-consumerism-based lifestyle.
Much of the energy that we use come in the form of liquid fuels. Mobile farm machinery and mining equipment, for example, often rely on diesel or kerosene to work. People who travel long and short distances for work or leisure also need energy; and out of necessity or convenience, many have little choice than to rely on a transportation system dominated by land, sea, and air vehicles that are powered by liquid fuels derived from petroleum. Although there are trains, trams, and trolleybuses that are powered by electricity, most of our electricity comes from burning fossil fuels (namely, coal, natural gas, and liquid petroleum in the form of fuel oil).
Petroleum is more scarce than natural gas and coal because there is less of it that accumulates and gets preserved in the planet's crust. Also, petroleum, until recently, has more uses compared to coal and natural gas. The chemicals and energy industries and, most of all, the transportation sector all consume large amounts of petroleum.
What is remarkable though is that current technology allows us to convert natural gas, coal, agricultural wastes, garbage, sewage, and even concentrated carbon dioxide into liquid fuels that have almost identical compositions and properties as the petroleum-derived liquid fuels that are becoming more and more expensive as “conventional” crude oil becomes more and more scarce. If our scientists, engineers, and government officials cannot devise and implement alternative transportation schemes that can replace or do away with liquid-petroleum-dependent modes of transportation, then, at the least, these alternative sources of liquid fuels can be harnessed. As crude oil becomes more and more expensive, the economics of converting other sources of energy into liquid or gaseous fuels for powering vehicles becomes more and more favorable.
And this is where Methanex and other “syngas-to-liquids” operations come into play. Syngas-to-liquids is a phrase that encompasses processes that convert solid, liquid, and gaseous materials into synthetic gas or syngas, which is simply a gas consisting of varying amounts of carbon monoxide, hydrogen, and carbon dioxide. Syngas is the starting material that is used to synthesize liquid fuels that are normally distilled from crude oil.
The most common process for manufacturing liquid fuels from syngas uses natural gas or other hydrocarbon-type gases as raw materials. This process is termed “gas-to-liquids.” Gas-to-liquids (GTL) is the most common syngas-to-liquids (STL) process. If non-gaseous raw materials are used whether they be solids (coal, bitumen, plastic wastes, vegetable wastes, etc.) or liquids (black liquor, heavy oil, sewage) the process is termed as “X-to-liquids” (XTL), where “X” refers to the any one of the possible source materials or feedstock. If the process or processes yield multiple liquids and/or non-liquids such as gases and solids (whether they can be used as fuels or not), the processes are termed as GTP and XTP, where the “P” stands for “products.”
To cut a long story short, Methanex and other STL outfits, whether they employ GTL/GTP or XTL/XTP processes, can manufacture either synthetic hydrocarbon liquid fuels (gasoline, diesel, kerosene, etc.) or non-hydrocarbon/alcohol-based fuels (such as methanol, ethanol, and dimethyl ether), as well as non-fuel chemicals (olefins, propylene) from non-liquid-petroleum source materials, whether these be other non-renewable fossil fuels (coal, natural gas, solid bitumen) or renewable biomass (municipal sewage, municipal solid wastes, wood chips, wheat straw, waste pulp, bagasse, black liquor, etc.). Some STL companies, such as Los Angeles-based Rentech and Sweden's Chemrec, can utilize waste biomass to produce synthetic fuels, but Methanex exclusively processes natural gas and may soon also utilize coal. Most methanol manufacturers in China (the country with the largest yearly output of methanol) use coal to manufacture methanol, dimethyl ether, formaldehyde, alkanes (olefins) and other chemicals used as fuels or raw materials for other commercial products such as paints, plastics, glues, etc.
Methanex has the advantage of having a recently re-opened plant in Medicine Hat, Alberta, in proximity to pipelines that carry dilbit, synbit, or synthetic crude oil from Alberta's oilsands. Methanex therefore can utilize not only natural gas for its typical GTL operation of converting natural gas to methanol, but ALSO bitumen for an XTL (or even an XTP) operation. Methanex can potentially yield huge amounts of methanol and methanol-derived products from the equally huge amounts of available Albertan bitumen. If Methanex can scale up its production so as to yield the lowest-priced methanol in the world market, then China (the world's largest consumer of methanol) might be willing to satisfy a large part of its methanol demand with methanol from Methanex. In China, methanol is used as a vehicular fuel in addition to being used as a feedstock/precursor chemical for various other chemicals.
Although the Chinese central government no longer pursues methanol blending as aggressively as in the past, using methanol as a gasoline extender has become common practice in many provinces and cities. Methanol demand from Chinese chemical companies is also rising while some methanol manufacturers fail to meet production targets because of water shortages or increased competition for coal from power companies.
But the biggest payoff for Methanex will come about if the Canadian Federal Government or even just the Alberta Provincial Government mandates adding 5% methanol to gasoline products sold all over Canada (or Alberta). If Canada consumes about 40 billion liters of gasoline every year, 5% of that would be 2 billion liters (roughly 2 million short tons). Methanex's plant in Trinidad and Tobago has a yearly production capacity of just 2.1 million tons.
This scenario illustrates one possible approach to “diversifying” Alberta's bitumen industry. Manufacturing methanol from the oilsands allows Alberta to sell more than one product (bitumen, methanol, dimethyl ether, ethene, formaldehyde, propene, etc.) to more than one buyers: Asia, US, and Canada.
[The author is not affiliated with nor has financial interests in Methanex. Opinions expressed in the article are solely of the author and are not intended to provide financial or investment advise.]