Council: Global gasification will surge

Pace of coal-to-gas conversion expected to accelerate as would-be developers learn more about and gain confidence

Gary Park

For Petroleum News

Gasification capacity is poised to grow 70 percent over the next seven years, setting the stage for greater acceptance in Canada, where the first commercial coal gasification project is making steady progress.

Sherritt International, which is partnering with the Ontario Teachers’ Pension Plan Board in the development of a plant in central Alberta is confident the learning curve is about to accelerate, according to the company’s commercial and projects director Sean McCaughan.

He told a late-September conference in Calgary the pace is “about to snowball … we (just) need those first few projects to come on line and learn from.”

The proposed Dodds-Roundhill Coal Gasification Project, now estimated to cost C$3.3 billion, is due for sanctioning in 2010 and commercial start-up in 2012.

An environment application is almost 90 percent completed and will be submitted in 2009 after engineering work is finished, he said.

Like all midstream operations, the project is grappling with challenges of capital cost escalation, labor and steel prices, the future of commodity prices, constraints on resources and regulations relating to greenhouse gas emissions, McCaughan said.

Sherritt is also looking for lessons at some of the 140 gasification plants operating worldwide, while undertaking its own research, including the construction of a laboratory to clean up coal by reducing ash content and upgrading the carbon content, he said

McCaughan said Sherritt is spending the money needed now to upgrade Western Canada’s low-rank coal to improve operating and capital costs.

The initial Dodds-Roundhill unit is designed to make 320 million cubic feet per day of synthetic gas from coal and further refine it into 270 Mmcf/d of hydrogen, both commodities required at steam-driven oil sands plants and by companies running bitumen upgraders.

To date, the partners have been unable to say with certainty that their product will be cheaper than natural gas.

Sherritt is now in discussions with prospective hydrogen buyers, believing the commodity will be in heavy demand in the industrial area near Edmonton.

The company is also exploring other end products, such as diesel, methanol and syngas.

Faced with the same cost challenges as other petroleum industry mega-projects – Cambridge Energy Research Associates estimates capital costs in the oil and gas sector have nearly doubled in three years - Sherritt is taking a disciplined approach, investing a lot of time on front-end engineering, feasibility studies and phasing strategies, McCaughan said.

The problems aside, the Gasification Technologies Council has boosted the outlook for gasification, forecasting 70 percent growth in capacity by 2015, with 80 percent of that increase expected to occur in Asia. The prime driving forces are the chemical, fertilizer and coal-to-liquids industries in China, the oil sands in Canada and polygeneration and substitute natural gas in the United States, and refining in Europe.

In just four years, 29 new gasification plants have been approved or built in China, but no new facilities have come on stream in the U.S. since 2002.

The council believes gasification is destined for faster expansion because of volatile oil and gas prices, tougher environmental regulations and a building consensus that carbon dioxide management will be applied in power generation and energy production.

Another breakthrough could involve new facilities in northeastern Alberta and/or the Powder River Basin in the U.S. by GreatPoint Energy, whose chief financial officer Daniel Goldman told the conference his company’s proprietary catalytic process could convert coal, petroleum coke and biomass directly into natural gas, while allowing for the capture and storage of carbon dioxide.

To prove up the technology, GreatPoint is building a testing facility in Massachusetts to expand the array of feedstocks it is using, he said, noting that oil sands producer Suncor Energy is a development partner and feedstock supplier.