Page 134 - CW E-Magazine (23-7-2024)

Point of View

in automobile fuel efficiency norms (for conventional vehicles), will curb demand for petrol and diesel and bend the demand curve for MTBE and biodiesel
downward from the trendline. How much this decline will be compensated by new fuel applications – mainly as bunker fuel in ships and as sustainable
aviation fuel – is not yet clear.

Methanol for chemicals
What about the traditional demand of methanol as a raw material to make other chemicals?

The single largest use is for making formaldehyde, followed by use for olefins (MTO) and acetic acid. Smaller uses include the manufacture of
chloromethanes, methylamines, and methyl methacrylate, amongst others. Overall, chemical demand for methanol is expected to average growth
of about 2.3% per annum. Regions expected to see above-average growth rates are China, India, parts of Southeast Asia, and North America.

Some of the demand growth in the US and China will come about by local consumption for derivatives to serve export markets, adding to
pressures in their destination countries. This is already evident in China wherein significant overcapacity exists for most derivatives. Given the
slowdown in the domestic market, Chinese producers will seek to export these at variable economics, if that, to keep operating rates high. In the US,
where the methanol industry has seen a resurgence with the availability of cheap shale gas, companies are now eyeing opportunities downstream.

Need for new capacity
According to estimates by S&P Global Commodity Insights, a consultancy, about 30-mt of new methanol capacity will be needed between 2023
and 2033, but only half has been sanctioned. This includes about 2-mt of low-carbon capacity. As a result, operating rates are expected to rise, after
a short trough from here, and support higher prices.
From the demand side the unknowns are the realisation of the potential as fuel in shipping, automotives, and in aviation. These will hinge on
the decarbonisation targets set by governments, and technological breakthroughs that will improve the economics of the processes for low-carbon
methanol. At the end of 2023, 190 methanol vessels (dual fuel) were on order, and these have a potential to absorb 17-mt of methanol annually.
Which is a lot!
Methanol is also being viewed as an efficient hydrogen carrier. Its’ simple molecular formula (CH OH) reveals that it packs more elemental
3
hydrogen than a single molecule of hydrogen (H ). Unlike the latter, which is an explosive gas at ambient conditions, methanol is a liquid that can be
2
handled, stored and transported with ease using existing infrastructure. Reforming of methanol yields hydrogen at the point of use, and so avoids
the complexities and high costs associated with the logistics of hydrogen as a fuel. The hydrogen so produced in situ can be used in fuel cells
(e.g., in cars or in stationary power units). While fuel cells have failed to live up to the promise for several decades, some experts believe this time
may be different.

The methanol markets of the future
Methanol is presently produced at very large scale, in ‘mega-methanol’ plant with sizes in the range of 3,000-tpd (tonnes per day) to 5,000-tpd – the
largest for any chemical.

But new routes to ‘greener’ methanol are now coming to the fore and the emphasis is on lowering its carbon footprint. Options include gasification
of organic municipal solid wastes (MSW), or even biomass; and reacting green hydrogen – obtained by electrolysis of water using renewable energy –
with carbon dioxide, pulled out from the air or from flue gases produced in industrial manufacture or energy plants. More than 10 low carbon methanol
units using biogas as feedstock are already operational across the world – albeit at a small scale – and a similar number are coupled with carbon capture
utilisation/storage (CCU/CCS) to yield a ‘blue’ methanol.

The methanol industry has historically leveraged scale, low-cost feedstocks and engineering efficiency to drive investment decisions, but green
methanol may upend some of these levers. Both green methanol produced from green hydrogen and captured carbon dioxide, as well as that produced
by gasification of biomass (including MSW) lend to smaller scale of operations, though upfront capital costs can be high due the complexities of
engineering (especially when gasifying biomass).

In short, the future methanol supply architecture, shaped by an increasing share of green methanol, may look very different from the petro-driven
structure today dominated by mammoth plants. From being a simple commodity, with virtually no product differentiation from one producer to another,
and near-unform pricing (at least within a region) methanol may slowly come to be a differentiated product with varying carbon footprints and pricing
depending on its origin and market it serves.

India has little chance of competing in the traditional methanol space, but green methanol can be a different story!
Ravi Raghavan

134 Chemical Weekly July 23, 2024

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