Energy reserves: Can methanol play a significant role?

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Author/Source: China Chemical Industry News Date: 2009-3-20 -------------------------------------------------------------------------------- The report titled \"Using Functional Reserves to Compensate for Resource Reserves,\" submitted jointly by 29 academicians including Jin Yong, Chen Bingzhen, Xie Kechang, and Mao Bingquan from the Chinese Academy of Engineering to relevant central government departments, has sparked much discussion among industry professionals since it was submitted last November. The report recommends **establishing strategic methanol reserves**. Recently, reporters met with academicians such as Jin Yong from the Chinese Academy of Engineering as well as officials from several methanol companies to determine whether this proposal is practical and feasible. Is it meaningful to stockpile methanol? “Methanol can serve as a substitute for petroleum reserves, and maintaining such reserves helps ensure the sustainable development of China’s coal chemical industry. ”As the initiator of the recommendation regarding methanol reserves, Jin Yong, an academician of the Chinese Academy of Engineering, said that due to the financial crisis, demand for methanol as a basic chemical product declined, leading to a reduction in the operating rates of methanol production plants that use coal as raw material. Many projects were either still under construction or had just started operations, and these enterprises faced severe challenges. The characteristics of China’s resources dictate the need to develop coal chemical industry and establish storage facilities. Materials are purchased and stored when market prices are low, and released when prices rise too rapidly, thus creating a mechanism for buying and selling that helps stabilize market fluctuations. This is one of them. Secondly, storing methanol serves as a functional strategic energy reserve. Our country officially launched its **strategic oil reserve in December 2007. However, oil reserves are large, investment in hardware facilities is substantial, and the construction time is long. Therefore, methanol reserves should be used to supplement the shortfall in China’s oil reserves. “The current model for oil reserves is to stockpile whatever resources are needed. If we change this way of thinking to one that focuses on what resources and functions are needed, we will then stockpile the resources required to fulfill those functions. In this way, the same goal can be achieved while also being easy to implement. ” It is understood that, according to estimates by the International Energy Agency, a member country’s oil reserves should be equivalent to 90 days’ worth of that country’s net imports of crude oil or refined oil. The EU stipulates that a member state’s oil reserves should equal 90 days of that country’s average domestic consumption of crude oil or refined products. Based on China’s current three-month oil consumption, 75 million tons of reserves are required ； Based on our country’s 3-month oil import volume, the reserve level also needs to reach over 30 million tons. At present, China has initially planned to complete the construction of the hardware facilities for these oil bases over a period of 15 years in three phases. The total investment is expected to exceed 100 billion yuan. By 2010, all four bases in Zhejiang’s Zhenhai, Zhejiang’s Zhoushan, Shandong’s Huangdao, and Liaoning’s Dalian will be fully established, with a storage capacity of roughly 28 million tons. The reserves expected to be formed by then will only reach 12 million tons, and it will not be until 2020 that the reserves will amount to three months’ worth of imports. The economic and security risks involved cannot be underestimated. “From the perspective of strategically important resources, fuels such as coal and natural gas are not suitable as reserve energy sources. ”Chen Bingzhen, an academician of the Chinese Academy of Engineering, told reporters that large amounts of coal stored in the air can undergo natural oxidation or even spontaneous combustion, and it is also difficult to transport, making its processing and transportation inconvenient. Although natural gas is convenient to process, transport, and use, it requires storage at high pressure, incurs high investment and storage costs, is extremely unsafe, and is not suitable for use as a strategic reserve. In comparison, methanol, as a basic product of the coal chemical industry, is suitable as a functional reserve resource to supplement China’s insufficient oil reserves. Firstly, methanol can be mixed with gasoline in various proportions (M5, M15, M85, M100) for use, or it can be converted into dimethyl ether through a simple dehydration reaction, and biodiesel can be synthesized by an esterification reaction between methanol and vegetable oil. Both are clean alternative fuels, and they are also cheaper. Chen Bingzhen told reporters that many petrochemical products are currently manufactured from crude oil as raw material. In fact, methanol can also replace petroleum and be processed into various petrochemical products. Mixed low-carbon olefins (ethylene, propylene, butylene, etc.) can be produced through the methanol to olefins process (MTO process), while propylene can be synthesized separately via the MTP process. Low-carbon olefins are key products in the petrochemical industry; moreover, MTA technology, which is used to produce aromatics (benzene, toluene, xylene, etc.), is also under development to meet the needs of the existing petrochemical sector. Moreover, methanol can be directly processed into a variety of products; it can be used as fuel for fuel cells or as an intermediate storage fuel for hydrogen. It is also a raw material traditionally used in the production of bulk chemicals such as formaldehyde, acetic acid, dimethyl carbonate, 1,4-butanediol, and acetyleneglycol. It serves as an intermediate compound in the manufacture of chloromethane and silicone products, and it has important applications as a solvent and adhesive as well. In short, the industrial chain that extends from methanol as a raw material is quite long, and storing methanol can reduce dependence on crude oil. The importance of reserves is even greater, especially when oil prices are particularly high. “If a methanol reserve of tens of millions of tons can be established in our country, it will certainly help reduce the pressure on oil reserves. ”Chen Bingzhen told the reporter. Is it feasible to store methanol? To stockpile methanol, it is first necessary to ensure that China has sufficient methanol production capacity and an excess output. According to the China Petroleum and Chemical Industry Association, in recent years China’s methanol production capacity has grown rapidly; the average annual growth rate of methanol production capacity from 2000 to 2008 was 23.5%, with growth rates as high as 76% in 2007 and 43% in 2008. In 2008, China added 7.98 million tons of methanol production capacity, bringing the total capacity to 28.18 million tons. It is estimated that by 2010, the total domestic methanol production capacity will reach around 50 million tons. Methanol production in our country is mainly concentrated in the northwest, north China, central China and other regions. In 2008, the top 10 provinces and municipalities in China in terms of methanol production were Henan, Shandong, Shaanxi, Hebei, Inner Mongolia, Shanxi, Hainan, Sichuan, Chongqing, and Heilongjiang, with their combined production accounting for over 70% of the country’s total. According to statistics from the China Petroleum and Chemical Industry Association, many coal chemical projects are still under construction or have just started operations. Jin Yong told reporters, \"The characteristics of China’s resources dictate the need to develop coal chemical industry and establish methanol reserves. Methanol is purchased and stored when market prices are low, and released when prices rise too rapidly, thereby creating a ‘buffer pool’ to stabilize market fluctuations.\" This is crucial for ensuring the sustainable and healthy development of China’s coal chemical industry. With low demand for methanol in the current market, methanol producers using coal as raw material are operating at a loss, making it an excellent opportunity to stock up. ” Jin Yong’s judgment was confirmed on the corporate side. Sun Yongkui, deputy general manager of Shandong Yankuang Guotai Chemical Co., Ltd., and Li Haofeng, head of the marketing department at Jiangsu Huachang Chemical Co., Ltd., both told reporters that due to various factors such as the financial crisis and the impact of imported methanol, demand for methanol in China is currently low. Methanol production companies that use coal as a raw material are operating at a loss, with their production rates declining; it is also difficult for demand and prices to recover. The production cost using the new coal gasification technology is currently between 2,100 and 2,200 yuan per ton, while the cost for production using fixed-bed gasification technology ranges from 2,300 to 2,400 yuan per ton. According to Xu Wenliang, deputy general manager of Yubei Chemical Co., Ltd. in Weihui City, Henan Province, the company’s production capacity has now been reduced to its minimum level. According to the academicians, methanol has low chemical toxicity and is not among the 33 substances harmful to health listed in the United States’ \"Urban Air Toxicants Strategy\". Methanol is naturally present in the human body at a level of 0.6 milligrams per kilogram of body weight; working for long periods in an environment with a methanol concentration of 200–250 ppm is harmless ； Methanol has low volatility; when exposed to air, its volatility is only 30% to 60% that of gasoline ； Methanol is also safe in the environment; its likelihood of causing fires and explosions is much lower than that of gasoline and diesel, and its ignition limit concentration is four times that of gasoline ； The hazards of methanol leaks are also less severe than those of gasoline and diesel ； Methanol dissolves in water, and is easy to dilute, extinguish, and degrade. Additionally, methanol has a simple composition, stable properties, and does not deteriorate easily during long-term storage. Academics generally believe that storing methanol is safe and controllable, and there are no technical challenges associated with such storage. Who will stockpile it? Where to stock it? Who will stockpile it? Where to stockpile? Only by resolving these two issues can the storage of methanol become feasible. Academicians such as Jin Yong and Ni Weidou suggest that methanol reserves could be established in inland provinces with abundant coal resources and a thriving coal chemical industry, such as Inner Mongolia, Xinjiang, Shanxi, and Shaanxi, as well as in cities located further back in regions like the Yangtze River Delta and Pearl River Delta, such as Anhui. It can be stored by **, methanol manufacturers, and local authorities; storage is also encouraged, for example by having companies build their own storage facilities, with rent charged to those companies. Chen Bingzhen explained that from the perspective of energy security, having methanol storage facilities spread out over different locations is safer than storing oil in coastal areas. At the same time, oil reserves require the construction of large storage tanks; for example, the Caofeidian Oil Reserve Base, which is included in the second batch of plans for **strategic oil reserve bases, will have a storage capacity of over 5.2 million tons. The area of a storage tank with a capacity of 100,000 tons is equivalent to that of a football field. 5.2 million tons, which is equivalent to building 52 oil storage tanks the size of football fields in Caofeidian. According to Sun Yongkui, deputy general manager of Shandong Yankuang Guotai Chemical Co., Ltd., current methanol production enterprises generally build storage tanks with a capacity to hold 10–15 days’ worth of methanol. By constructing such storage tanks, enterprises can increase their storage capacity and enhance their resilience in terms of production and operations. **Professor Fang Dewei, chief engineer at the Productivity Promotion Center for the chemical industry, said that currently, in China, the outdated methanol production capacity based on fixed-bed gasification technology accounts for nearly half of the total methanol production capacity. This financial crisis will push China’s methanol industry into a period of consolidation, and it may be difficult to restart the outdated production capacities that have already been shut down. Through methanol reserves, it is possible to quickly restore optimal production capacity and optimize the methanol industry structure.