The Northwest is currently deciding whether to allow the Chinese government to build three export-oriented refineries in our region—specifically at Kalama and Tacoma, Washington, and near Clatskanie, Oregon. They would more than triple total US methanol production in order to fuel plastics manufacturing abroad. In our first installment on the subject, Sightline explored the fundamentals of these planned projects. Here, we will examine some key features of the industry.
What is methanol?
Methanol (CH3OH) is a simple alcohol—a light, colorless, and flammable liquid at room temperature. Although methanol is present in the environment in small amounts, we also synthesize it for industrial purposes from fossil fuels (oil, coal, and natural gas) or biomass (wood and plant material). We use methanol for transportation fuel (biodiesel), portable fuel cells, wastewater treatment, and to manufacture common products like formaldehyde, acetic acid, plastics, paints, resins, and insulations.
What happens at a methanol refinery?
To understand the methanol projects proposed for Oregon and Washington, you’ll have to endure a little chemistry lesson. (It won’t hurt much.)
If built, the Northwest refineries would receive natural gas by pipeline and “desulfurize” it using zinc oxide to absorb sulfur from the gas stream. Then, in a process called steam methane reforming, a nickel-based catalyst reforms the natural gas into a “synthesis gas” made up of hydrogen (H2), carbon monoxide (CO), and carbon dioxide (CO2). Next, a heat-based catalytic process, typically using copper and zinc in a reforming furnace, converts the synthesis gas to crude methanol. (Each of these processes can be carried out in other ways, too.) Finally, the crude methanol is distilled and purified into manufacturing-grade methanol.
Methanol refining requires prodigious amounts of energy. Just powering a refinery’s operations would require burning about one-third of the natural gas that’s piped into the facility. The plants would each have a power load of 200 megawatts of electricity, use about 2,500 gallons of water per minute, and produce a stew of waste that includes heavy metals, volatile organic compounds, and various air pollutants.
The proposed Northwest facilities would load their finished methanol product onto Panamax-sized ships bound for Dalian, China. In Dalian, the methanol would be transferred to yet-to-be-built methanol storage facilities to be used in still more yet-to-be-built methanol-to-olefin (MTO) units that would, as their name suggests, use chemical processes to turn methanol to “olefins.”
Olefins (CnH2n) are a group of particularly reactive hydrocarbons that are mostly used to make plastics. They are rare in nature but can be artificially manufactured in large quantities. Two of the most widely used olefins are ethylene and propylene.
Why produce in the Northwest?
The Chinese government is behind the three Northwest methanol proposals, and the timing is no coincidence. Industry analysts predict an unprecedented increase in global methanol production owing to a fairly new refining technology. This technology would allow Chinese producers to make olefins using methanol derived from cheap coal or natural gas instead of using the more costly petroleum-based feedstock naphtha.
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China has abundant supplies of cheap domestic coal, yet because most of it is in a remote western part of the country, it works out that importing methanol by sea is cheaper than moving coal by land to methanol refineries. (China’s recent limitations on coal production and consumption further incentivize Chinese industrial interests to import US methanol.) Meanwhile, China is unlikely to produce its own methanol from natural gas because natural gas costs about four times as much as it does in the United States—and the cost of natural gas is the main variable in making methanol.
In short, the US is set to become a “methanol surrogate” for China because it can supply its own refineries with cheap, fracked shale gas instead.
How will the Chinese use US methanol?
Industry analysts have also projected global methanol consumption to nearly double between 2013 and 2023. In China, which is home to more than half of global methanol production capacity, methanol consumption is projected to jump from 30 million metric tons per year (mmta) in 2013 to more than 67 mmta by 2023. RnR Market Research reported that much of this demand is driven by a plan to implement a mandatory 15 percent methanol blend with gasoline, as well as economic growth-driven increases in using methanol to make paints, plastics, adhesives, and solvents.
Cause for caution
The increases forecasted in global demand for methanol, coupled with the United States’ abundance of cheap natural gas, make entering the methanol industry seem enticing, and it would appear that the Northwest is poised to become a hub for the global methanol trade. But production is booming in another region as well. The vast majority of new methanol projects are located in the Gulf Coast, and a major Shanghai-based energy company recently noted that the atmosphere on the Gulf Coast is “nothing short of a gold rush.”
A gold rush is the sort of boosterish terminology Northwest communities have heard before. In 2012, when coal export plans were first appearing, project backers hyped the projects with talk of a “coal supercycle” and insatiable Asian demand for thermal coal. Those predictions evaporated a few years later.
As China’s economy cools, it remains to be seen whether the huge profits that analysts envision for Northwest methanol exports are sustainable. In fact, the world methanol market has been oversupplied as recently as 2008, when many plants were just starting up. While the new proposed refineries would meet a near-term demand for cheap methanol in China, it remains to be seen what the Pacific Northwest will have gained after the gold rush fever abates.
Tarika Powell contributed to this article.