海角大神

China鈥檚 Production of Synthetic Natural Gas Has Global Implications

In its latest聽Medium-Term Coal Market Report聽the International Energy Agency (IEA) forecasts a slowing of coal demand growth but no retreat in its global use. That won鈥檛 surprise energy realists, but the item I wasn鈥檛 expecting was聽the reference in the IEA聽press release聽to growing efforts in China to convert coal into liquid fuels and especially synthetic natural gas (SNG).

It鈥檚 not hard to imagine China鈥檚 planners viewing SNG as a promising avenue for聽addressing the聽severe local air pollution in that country鈥檚 major cities, but聽the resulting increase in聽CO2 emissions could be substantial. It could also affect the economics of natural gas projects around the Pacific Rim.

A Solution for China鈥檚 Smog?

Air quality聽in China鈥檚 cities聽has fallen to levels not seen in developed countries for聽many decades. There鈥檚 even a聽smartphone app聽to help residents and visitors avoid the worst exposures. Much of this pollution, in the form of oxides of sulfur and nitrogen and聽particulate matter, is the result of coal combustion in power plants. Although China is adding wind and solar power聽capacity at a rapid clip, after years of exporting most of their solar panel output, the scale of the country鈥檚 coal聽use doesn鈥檛 lend itself to easy or quick聽substitution by these renewables.聽

聽Natural gas offers a lower-emitting alternative to coal on a聽larger scale than renewables. Existing聽coal-fired power plants could be converted to run on gas or replaced with modern combined-cycle gas turbine power plants. Gas-fired power plants聽emit up to聽99% fewer local, or 鈥渃riteria鈥澛爌ollutants聽than聽coal plants, especially those with minimal exhaust scrubbing.

Unfortunately, China doesn鈥檛 have enough domestic natural gas to go around. Despite potentially world-classshale gas聽resources聽and the rapid growth of coal-bed methane and more conventional gas sources, natural gas supplies聽only 4%聽of China鈥檚 energy needs. Imported LNG can help fill the gap, but it isn鈥檛 cheap. What China has in聽abundance聽is coal. Converting some of it to SNG could boost China鈥檚 gas supply relatively quickly鈥損erhaps faster than the country鈥檚 shale gas infrastructure and聽expertise can gear up.

How Would It Work?

SNG is hardly a new idea; the聽Great Plains Synfuels Plant聽has been producing it in North Dakota since the 1980s.聽When that facility was built, natural gas prices were聽volatile and rising,聽and greenhouse gas emissions appeared on聽no one鈥檚 radar.

The聽process for making SNG聽from coal is straightforward, and its primary building block, the gasification unit, is聽off-the-shelf technology. I worked with this technology briefly in the 1980s, and my former employer, Texaco, licensed dozens of gasification units in China before the technology was eventually purchased by GE. Other vendors offer similar processes.

Gasifying coal adds a layer of complexity, compared to gasifying聽liquid hydrocarbons but this, too, has been demonstrated in commercial operations. Most of the output of the facilities Texaco sold to China was used to make chemicals, but the chemistry of turning syngas (hydrogen plus carbon monoxide) into pipeline-quality methane is no more challenging.

This effort is already under way in China. In October Scientific American聽reported聽that the first of China鈥檚 SNG facilities had started shipping gas to customers, with four more plants in various stages of construction and another five approved earlier this year. The combined capacity of China鈥檚聽nine identified SNG projects聽comes to around 3.5 billion cubic feet per day, or a bit more than the entire聽Barnett Shale聽near Dallas, Texas produced in 2007 as US shale gas production was ramping up. It鈥檚 also just over a quarter of China鈥檚 totalnatural gas consumption聽in 2012, including imported LNG.

To put that in perspective, if that quantity of SNG were converted to electricity in efficient combined cycle plants their output would be roughly double that of China鈥檚聽75,000 MW of installed wind turbines聽in 2012, when wind generated around 2% of the country鈥檚 electricity.

What鈥檚 the Catch?

The appeal of converting millions of tons a year of dirty coal into clean-burning natural gas, in facilities located far from China鈥檚 population centers, is clear.聽This strategy even has some similarities to one pursued by聽southern California鈥檚 utilities, which for years imported power from the big coal-fired plants at聽Four Corners.聽聽For that matter, the gasification process has some key advantages over the standard coal power plant technologies in the ease with which criteria pollutants can be addressed. Generating power from coal-based SNG might actually reduce total criteria pollutants, rather than just relocating them.

However, wherever these plants are built they would add around聽500 million metric tons per year聽of CO2, or around 5% of聽China鈥檚 2012 emissions, a figure that dwarfs even the most聽pessimistic estimates聽of the emissions consequences of building the聽Keystone XL pipeline. That鈥檚 because the lifecycle emissions for SNG-generated power have been聽estimated聽at seven times those from natural gas, and 36-82% higher than simply burning the coal for power generation.

What could possibly lead China鈥檚 government to pursue聽such an option, in spite of widespread concerns about climate change and China鈥檚 own聽commitments聽to reduce the emissions intensity of its economy? Having lived in Los Angeles when it was still experiencing聽frequent first-stage smog alerts聽and occasional second-stage alerts, I have some sympathy for their problem. China鈥檚 air pollution causes even more serious聽health聽and economic impacts聽and has been blamed for聽over a million聽premature deaths each year. By comparison the consequences of greenhouse gas emissions are more indirect, remote and uncertain.聽Any rational system of governance would have to put a higher priority on air pollution at China鈥檚聽current levels than on CO2 emissions.

It might even turn out to be a reasonable call on emissions, if China鈥檚 planners envision carbon capture and sequestration (CCS) becoming economical within the next decade. It鈥檚 much easier to capture high-purity, sequestration-ready聽CO2 from a gasifier than a pulverized coal power plant. (At one time I sold the 99% pure CO2 from the gasifier at聽what was then Texaco鈥檚 Los Angeles refinery to聽companies that produced food-grade dry ice.) It should also be much easier and cheaper to retrofit a gasifier for CCS than a power plant.

Conclusions 鈥� China鈥檚 Synthetic Natural Gas Is A Wild Card

In an internal context the trade-off that China is choosing in converting coal into synthetic natural gas is understandable. However, that perspective is unlikely to be shared by other countries that won鈥檛 benefit from the resulting improvement in local air quality and view China鈥檚 rising CO2 emissions with alarm. I would be surprised if聽the emissions from SNG聽were factored into anyone鈥檚 projections, and nine SNG plants could be just the camel鈥檚 nose under the tent.

In an environment that the IEA has described as a potential聽Golden Age of Natural Gas, large-scale production of SNG could also constitute an unexpected wild card for energy markets. When added to China鈥檚 shale gas potential, it鈥檚 another trend for LNG developers and exporters in North America and elsewhere to monitor closely.

Source:聽Converting聽Coal to Gas in China: Trading Smog for CO2