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23 September 2021

“Kommercheskiye Vesti”: From oil fuel to methanol, from methanol to bioethanol

About the future of fuel material and world decarbonization.

On September 2, the panel discussion “Carbonless energy industry. The future of fuel materials” was held within the Eastern Economic Forum. The past year has become a challenge for the oil and gas sector. However, the petrochemical industry has once again shown its resistance to financial and economic problems, having demonstrated the growth in quite a number of sectors. As the climate agenda intensifies, the share of oil and petroleum products is expected to stop dominating in the world's fuel basket by the 2040’s, whereas petrochemical products are expected to occupy new market niches and as for developing this industry companies and countries, they will be able not only to diversify their production but provide a reliable source for products with low carbon footprint and high added value.

Deputy Minister of Energy of the Russian Federation Pavel SOROKIN said that the issue of hydrocarbons future had never been more acute:

- They make up to a quarter of Russia's GDP and up to half of the federal budget at varying price levels. The topic is very important for our whole country. The Department of Energy aims to use all the opportunities we have in the long term. For the industry as a whole, it means extra costs - somewhere on the supply curve – there will be changes with the ability of the company to offer its products at a competitive price. In other words, no matter whether it is cross-border carbon taxes or various environmental fees to change consumer preferences. This all will mean extra expenses for an enterprise to sell one ton of its products. It is also related to oil, gas and more complex polymers.

Officials understand the importance of manufacturers’ competitive advantages:

-In case of mismatching with the supply curve by some manufacturers, it is necessary to make sure that domestic enterprises will remain their competitive position. There are all prerequisites therefore, first of all the availability of raw materials for the production of almost the entire oil and gas chemical line.

The Russian Federation needs to extend this line:

-Today, a large-tonnage polymer is in our priorities. We have quite clear plans for polyethylene and propylene markets: we can achieve up to 6 – 7% of the global market in this segment, which is almost double the current level. Methanol production is also perspective. China is one of the main consumers. We can see potentially 6-7 million tons of additional projects that are now either being discussed or already under construction, which will allow us to significantly increase our global market share, also almost doubling.

A separate foundation stone of the Russian Federation Government strategy is monetization and mobility of liquefied natural gas reserves:

- If now we produce only over 30 million tons of LNG, by 2035 we will be able to produce 120-140 million tons - up to 20% of the world market. We should not forget that the development of the petrochemical section is a huge order for the entire industry during the construction period (equipment and its maintenance). LNG is a $ 60-70 billion investment over the 10–12-year horizon. Petrochemicals in terms of polymers - about $ 30-40 billion in investments. That is, more than 100 billion of attracted private and external money is already being earned for two segments. This is a gigantic multiplier effect. And within 10 years, our industrial enterprises will be provided with a clear, guaranteed and transparent order. The more raw materials we will process, the more added value we will make – in case of ethane the added value goes up to four - five times (and even more if it is used in low-tonnage chemistry). But I have to note that you should not be too confident as it is impossible to recycle 100% of the product.

Deputy Minister of Industry and Trade of the Russian Federation Viktor YEVTUKHOV noted that Russia will have to develop the low-carbon fuel production:

- It is inescapable for Russia. Firstly, we have our own requirements and secondly, within basic industries we are net exporters and we supply more products to the foreign market than we consume at home. Our products have been included in the list of those goods that are currently being considered in the EU carbon tax document. There is just the petrochemical industry and metallurgy. Many enterprises have already started thinking about it. If you take the metallurgical sector, there is a responsible policy in all areas related to ecology and creating a product using recycled resources, establishing holdings, companies that are among the world leaders in terms of technologies that reduce CO2 emissions. Metallurgists will probably have some difficulties as they face different external factors including antidumping, special protection investigations, carbon tax. Do not forget that hydro and nuclear energetics accounts for 40% of our country energy balance. This is our competitive advantage as well.

Then top-managers gave a speech. Chairman of the Management Board, General Director of SIBUR LLC Mikhail KARISALOV assured that despite the green agenda, fuel materials still had a very positive future. The speaker ironically remarked the mistake of an average person to think that a plastic bag was more harmful to nature than a paper one – absolutely on the contrary. The same situation is with a plastic bottle, which generates far less carbon gas than an aluminum can. The top manager noted the popularity of polymers abroad and our lagging behind. In developed countries, more than 40 kg of polymers are used by a person per year; in China the number is even higher. The potential of polymers recycling involvement in Russia in the distance to 2030 can be up to 200 thousand tons per year.

KARISALOV, however, gave a positive outlook on "greening" the oil and gas chemical industry and outlined SIBUR's place in this process. The company sees the prospect in associated gas recycling instead of burning. According to the speaker, the environmental friendliness of the Amur Mining and Chemical Complex (their new project) will surpass most European counterparts in lots of indicators - this includes a closed water treatment cycle, as well as closed-type smokeless combustion flares and other advanced technologies. Planned connection of the enterprise to “green” generation will significantly “green” Amur Mining and Chemical Complex product indicators and will further increase its competitiveness: SIBUR will purchase 1.3 billion kW per year of RusHydro capacities under a 20-year contract. Another promising initiative by SIBUR to reduce its carbon footprint is construction in Bashkortostan at the AO POLYEF of a facility for secondary raw materials recycling to produce "green" PET pellets and a new eco-friendly product line under Vivilen brand.

Vadim MEDVEDEV, Vice President of the GC ESN, announced the construction of a methanol production plant in Skovorodino, Amur Region:

- Within the environmental agenda, we have found a niche for ourselves related to combustible fuels. The global market for marine fuels is estimated at 0 billion. Today it is 100% produced from oil and has a negative ecological footprint. The ecological screws are being tightened before our eyes. For all producers of low-carbon fuels there is an opportunity to compete for a new niche. Methanol has a lot of prospects for a number of reasons - significantly lower content of harmful components, for example, the content of nitrogen oxides in it is half as much as in conventional fuel, sulfur and aromatics components - a hundred times (do not be surprised). Methanol decomposes absolutely painlessly in water in a matter of minutes.  It is the only substitute for hydrogen, green ammonia and even liquefied natural gas that is stored at room temperature and the appropriate atmospheric pressure and requires no investment in infrastructure or bunkering. Even with all things considered, methanol costs on the world market the same as traditional marine fuel - approximately from 0 to 0.

Among other things, the company is focused on the domestic market, as the river shipping is well-developed in Russia:

- Here is an example of roundwood export ban aimed at raw materials processing, establishment of industrial production facilities. Apart from simply roundwood sawing into boards, any furniture production, all types of plywood, various boards require formaldehyde as binder, the raw material for which is methanol. Russia stimulating policy of wood processing will give an impetus to chemical production.

The speaker from Omsk, Chairman of The Board of Directors of the AO Group of companies Titan Mikhail SUTYAGINSKY announced plans to produce high-octane fuel components that would reduce emissions from motor vehicles by 40% regardless of whether they are used in Euro-2 or Euro-5 engines. A new production of ethyl tert-butyl ether is being designed, which will be located at the site of the AO “Omsky Kauchuk”. It is the additive that will improve gasoline environmental specifications. - - In 2006-2008 the company launched its first bioethanol production project in Kazakhstan. On this basis we tested the possibility of producing gasoline in different parts of the Russian Federation. Now we will be able to produce from 8 to 13 million tons of high-octane gasoline per year.

According to experts' estimates, due to consumers' transition to higher-class fuels, which will not impact their wallet, the appearance on the market of Titan's component will reduce motor transport emissions by 2-2.5 million in Russia. The project also involves natural gas (467 million cubic meters) and oil (1.5 million tons) saving by replacing methanol with ethanol of vegetable origin.

According to SUTYAGINSKY, the project in Omsk will ensure processing of millions tons of grain and low-grade raw materials per month. This will put 600-800 thousand hectares of local land back into circulation. 175,000 tons of CO2 can be recycled into mineral fertilizer and chemical precipitated chalk used in composites.

Source: "Kommercheskiye Vesti", 23.09.2021

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