The country’s raw gas is primarily driven by the hydrocarbon industry – of which the lion’s share would be by-product of the ammonia business – state-owned by Pemex – and includes some sourcing from the ethylene oxide sector.
Despite strong raw gas prices from the state-owned hydrocarbon sector, Pemex would rather combine the product to manufacture urea. Sources continue to be almost absolutely restricted by the state, rather than selling to a well-paying merchant sector. In the end, some feel by-product will be released eventually, however, this schedule is unknown.
In terms of US upsets in sourcing and supply, numerous ethanol plants have been temporarily closed or mothballed, in part due to the industry’s largest export market lost, namely China. This is due to the trade war, and other factors. Most of the new sources in the US are from ethanol, where other sources of a traditional nature are virtually unavailable in places where the product is needed.
There is some optimism for source developments in the direct air capture (DAC) sector, however I feel there are too many elements missing from the assumptions shown by these technologies; fundamentally, it would be impossible to compete against traditional sources in this country, without subsidies. The same applies to flue gas, which requires subsidies to be competitive. The most recent such project is the Petra Nova project in Texas using Mitsubishi’s plant for EOR (enhanced oil recovery) service and rated at over 4,000 tonnes per day. This was DOE funded, and any similar project would require subsidies.
In the end, should we have subsidies, tax credits, a carbon tax, or other mechanisms to reduce airborne CO2 emissions, which would have a valuable place in our economy, this is a positive project and valuable result. I fully believe in flue gas, however, it must be subsidised in order to work in real world economics. On the positive side, we have numerous mechanisms to support some of these technologies at this time, and it is hoped that many more will emerge.
The aftermath of the major gas mergers leaves some customers with concerns, specifically less competition. What I have observed over the decades is a cycle of consolidation and, subsequently, the rise of new or independent competition. One could only suspect this cycle will reappear over the years ahead; it is likely inevitable.
With California’s low carbon fuel standard, and similar laws being adopted by other state legislatures, as well as other mechanisms to support the development of biofuels projects and viable sequestration alternatives to carbon emissions and utilisation, a new frontier has opened for project opportunities. Much talk and early planning is occurring along the way, and I am interested to participate in these developments. This represents business opportunities and even more importantly, mechanisms to reduce carbon emissions where, globally, we are now in excess of 400 parts-per-million (ppm) atmospheric CO2, – a path to destruction without major change.
2020 – a view ahead
The industry is always keen to develop and foster new and improved applications for the commodity; maybe this could involve CO2 conversion and application in the production of plastics, for example.
With the LCFS (low carbon fuel standard), tax credits, and other mechanisms which now exist, CO2 can be used in alternate, sequestered, and enriched markets – all of which represent new and enhanced opportunities.
As mentioned earlier, output capacity, and operating plants in the ethanol industry have taken a hit due to the factors mentioned above, and it is unclear if this trend will continue, and will have an adverse effect upon the CO2 industry (understanding of course that those ethanol plants which supply the industry are only a fraction of the total number). The ultimate factors include location, distribution costs and source replacements, or the cost of moving a plant to another ethanol source. Such factors will play into the economics of the CO2 industry in 2020, unless circumstances around ethanol change significantly.
Therefore, 2020 will be a year of opportunity and caution for the industry.