Coal to chemicals - the challenges
There
has been much talk recently about building a coal-based chemical and fertiliser
industry in the country. The logic seems to be that this is a fossil resource
that India is adequately blessed with, with reserves expected to last a few
hundred years, unlike crude oil or natural gas, wherein the resource base, as
currently estimated, expected to last just a few decades. In a sense this is
replication of the model of development followed in China, which now has a
sizeable coal-based chemical, petrochemical and fertiliser industry.
While
the strategy has its merits, it is not without challenges. These are technical,
environmental and, importantly, economic, and overcoming them will take
concerted efforts amongst policy planners, regulators, R&D scientists and
investors willing to take billion dollar bets.
Back to the future
The
use of coal for making chemicals is now new. The fossil fuel was the
hydrocarbon used before oil came into the picture, and a fairly significant
chemical industry, though one not as multi dimensional as now, came to be built
on it. The availability of low-priced crude oil and its refined fractions, in
particular, naphtha, led to the development of the modern petrochemical
industry as we now know it, starting in the 1940s – a golden period for the
industry. Use of natural gas and its fractions – especially methane, ethane and
propane – further drove investments in the chemical industry, and coal was
almost entirely knocked out of the picture more less everywhere in the world.
Its use was relegated to South Africa where economic isolation forced the
country to adopt locally available resources, and a few plants in the United
States.
About
10 years ago, coal made a comeback, this time in China. In the decade since,
the country has taken giant strides in using it to make several chemicals
including ammonia (mainly for urea) methanol, dimethyl ether (DME),
monoethylene glycol (MEG), olefins & polyolefins, acetylene, vinyl chloride
monomer (VCM) and polyvinyl chloride (PVC).
Gasification route
The
principal route taken to valorise coal as a chemical feedstock is its
gasification to make synthesis gas (syngas, a mixture of carbon monoxide and
hydrogen), which can then be converted to methanol, ammonia, synthetic natural
gas (SNG) for power generation, or used as reducing agent in the manufacture of
steel from iron ore.
Using
imported and domestically developed technologies, world-scale plants have been
built in China to convert methanol to olefins (MTO). The methanol is being used
as a blend to gasoline or converted to DME and then used as a substitute for
LPG and diesel as fuel.
Competitive economics
The
economics of integrated coal-to-methanol (CTM) plants work best at the pithead
of coalmines and most projects are located in the relatively underdeveloped
northwestern parts of China. MTO projects located elsewhere (where the markets
for polyolefins lie) are instead based in imported methanol (produced almost
exclusively from natural gas). The cost position of the polyolefins from CTM or
MTO plants have been attractive and only bettered by gas-based producers in
North America and the Middle East. But the low price of oil has improved the
economics of naphtha cracking and eroded some of the advantage gas- and
coal-based ethylene enjoyed, and this has put a dampener on new CTM/MTO
projects.
The
environmental footprint of CTM and MTO plants is also heavier, in terms of
their energy and water. This could have implications in a world where carbon
would need to be priced into the product, perhaps as part of multilateral
agreements to curb emissions of greenhouse gases.
Thanks
to the build-up in China, the number of gasifiers operating in the world today
has increased from 420 in 2007 to more than 500 today – with about two-third
cracking coal and one-third petroleum coke (petcoke), a low-value by-product of
crude oil refining. Between 2004 and 2012, 42 gasification plants started up –
all in China.
Technical challenges
The
technical challenges of gasification are enormous: scaling up the gasifiers to
the sizes needed for commercial viability poses several engineering challenges,
including in operations and maintenance. The equipment are prone to unexpected
shutdowns and breakdowns and are capital intensive to build. In the Indian
context, where domestically available coal is of high ash content – as high as
50% in some instances – the challenges are even greater. There are few
technology vendors for gasifiers that can handle these qualities of coal, and
even fewer with the experience of running such plants for long periods of time.
Coal options for India
One
way to combat the high ash problem is to use a blend of thermal coal and
petcoke and this is rightly the option the Indian projects are considering. The
strategy is to lower the effective ash content to the realm of 25-30% and then
gasify. Reliance Industries Ltd., which is putting up 10 gasifiers in Jamnagar
where its giant refinery is based, is obviating this problem by using captively
produced petcoke (supplemented by imports). This has no ash problem and
provides a considerable value addition to a bottom-of-the-barrel product that
has little alternate value.
Urea subsidy policy
Aside
of the Reliance project wherein the syngas produced will substitute for
expensive imported LNG for meeting the needs of the refinery-cum-petrochemical
complex, all gasification projects now being contemplated here involve using
syngas for production of ammonia and urea. These projects face another daunting
challenge to commercial viability – the controlled, low price at which they
must sell urea. The balance between the cost of production and the selling price
is currently compensated to all urea producers as subsidy, but the existing
policy caters to only gas-based producers and a couple who continue to use
naphtha for want of gas linkage. The commercial viability of coal-based urea
production will need a significantly higher allocation of subsidy than now
doled out and this is yet to be formalised. Till that happens, the projects
planned will not go beyond schemes on paper.
Building a methanol economy
There
are ambitious plans to also build a ‘methanol economy’ based on coal as raw
material, and use the methanol as blend in internal combustion engines, as
chemical feedstock to produce olefins, for making DME to substitute LPG &
diesel, and for use in fuel cells to generate power. Again, the capital expenditure
(capex) on CTM projects significantly higher than methanol projects based on
gas that are the norm everywhere else but China.
A
Task Force on Production of Methanol from Coal, which has been mandated with
steering this strategy, has assessed that viability will hinge on making coal
available at a price of Rs. 2,500 per tonne, a coal conversion efficiency of
3.5 kg of coal per kg of methanol, and a capex of Rs. 1.5-crore per tpd (tonnes
per day) of methanol capacity. While the first condition could be met by a fiat
to coal companies to supply at the designated price, keeping capex low will be
hugely challenging. The prices currently quoted by international technology
vendors are way above this benchmark, and the belief is that domestic R&D
efforts could achieve this. Keeping the operating expense (determined to a
significant extent by the price paid for coal) low will not be enough to
compensate for the high capex.
Three-phase approach
The
Task Force has outlined a three-phase approach to indigenous technology
development, involving generation of blueprints first for a pilot plant at
1-tpd and then at a scale of 100-tpd and eventually at commercial scale
(1,500-5,000 tpd). This programme is to be spread over the next 12 years, and
the eventual goal is to achieve a methanol capacity of 40-mtpa by 2030. For
now, a consortium of IIT-Delhi and Thermax Ltd. has been provided a Rs.
50-crore grant for developing a demonstration scale process, using circulating
fluidised bed technology.
Long way to go
But
this is just the beginning of the journey and it will only get riskier in the
next two phases of technology development. Few Indian entrepreneurs have so far
shown the appetite for risky projects and even less faith in domestic
technologies when even imported ones have their share of failure. Getting them,
or even the public sector companies, to invest will require considerable
handholding, and fiscal & policy support. The technology fix may actually
be the easiest!
Chemical
Weekly Issue date: 3rd April 2018
Author: Ravi
Raghavan
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