Gas prices too high

San Francisco -- Soaring natural gas prices (especially in North America) and technology evolution help explain renewed enthusiasm for gasification of coal, petroleum coke, wastes, biomass or other materials for "clean" electricity, hydrogen, chemicals and fuels.

As Gasification Technologies Council director Jim Childress explained to the Gasfication Technology (GTC) 2003 meeting here, "this is a record turnout since 9/11--people are feeling if not bullish then on the near side of it."

On a similar note, conference general session chair Chuck McConnell (Praxair) termed gasification project investment enthusiasm moving into "the go-zone."

However, large uncertainties about long-term natural gas price levels, as well as wide variations in projected capex costs for integrated gasification combined cycle (IGCC) for power, steam, hydrogen and possible Fischer-Tropsch fuels production still put dampers on gasification projects.

Uncertain regulatory deadlines for ultra-clean plant emissions and C[O.sub.2] capture--which could favor continued operation of old, "dirty" coal-burning power plants - also put a damper on enthusiasm, experts at GTC 2003 said here.

All this could explain why all refiners haven't yet made massive moves into IGCC for their growing output of relatively low-value petcoke (from heavy crude coking). It also explains why more electric generators haven't suddenly hit the "go" button for coal-IGCC, although interest and new project plans are definitely on the upswing.

ConocoPhillips' recent purchase of "E-gas" gasification technology looks like encouraging news for the expansion of coke-gasification. In a presentation here, gasification tech director Phil Amick pointed out that his new employer (ConocoPhillips) is the world's leading producer of petcoke (15% of global total via 16 delayed cokers), as well as the U.S.'s biggest refiner (12 refineries in U.S., five in Europe, one in Asia).

"E-gas" (or whatever ConocoPhillips eventually calls it) has a long pedigree, starting with Dow prototype plants from 1973-1989. This evolved into Destec (a Dow spinoff), which built the Wabash River IGCC plant, one of only two coal/coke-IGCC plants in the entire U.S. Then NGC purchased Destec in 1997, which changed its name to Dynegy a year later. Then Global Energy bought Dynegy's gasification unit in 2000, and then in July 2003, sold it to ConocoPhillips.

Now, not only does ConocoPhillips get the intellectual property behind "E-gas (and 23 technical/managerial people involved, including Amick), but it also retains projects in development and U.S. Dept. of Energy contracts, as well as support services for Wabash River and access for testing.

What's more, the "E-gas" technology will provide synergy with the company's existing coker licensing. Gasification also "solves potential disposal problems and refinery hydrogen needs," Amick said. It also can fit into the company's coke marketing business.

Meantime, ConocoPhillips' novel "S-Zorb" sulfur removal catalyst (currently 42 licenses for gasoline sulfur removal) will "soon" find synergy with E-gas sulfur removal, and synergies for GTL will come "later," Amick said.

"There's a potential 50% cost reduction of gas cleanup with warm gas (~700[degrees]F) sulfur removal, with some variation of S-Zorb or some other catalyst," Amick told us here.

Given that only about one refinery coking unit is installed every couple of years (almost exclusively in Gulf Coast markets of the Americas), "E-gas" would have limited commercial potential if restricted to coke. Fortunately, potentially huge growth is on the horizon for coal-IGCC as states and other regulators come to adopt IGCC as "best available control technology" (BACT) for power generation.

"This technology is competitive with other coal combustion technology and we're getting environmental recognition," he said. "In the last 9-10 months, state regulators have come to realize it--it's a commercial but still complex technology, and the market wants it at lower cost.

"Fischer-Tropsch [addition] is also possible, and there's an opportunity to free refineries from natural gas pricing exposure" for hydrogen and power, he added. Similarly enthusiastic on gasification prospects here was ChevronTexaco (CVX) power & gasification VP William Preston. Clean electric power is by far the biggest "market pull," compared to fertilizer, chemicals or hydrogen production, Preston showed. Still, relatively high capital cost--and technology risk mitigation--remain the key dampers behind more gasification expansion, he showed.

To date, CVX's gasification projects in the Americas include chemicals (Eastman Chemical, Farmland, ExxonMobil-Baytown, Air Liquide, Air Products, Union Carbide and T&P), refining (Motiva-Delaware City and Convent, La.; Frontier Refining); and utility power (Tampa Electric).

For Europe, gasification project drivers include refiners' greater use of heavy crudes; rapidly declining value of heavy fuel oil/resid markets; Kyoto Protocol C[O.sub.2] limits and emissions trading;, a rising need for refinery hydrogen, and a "re-examination of coal usage," Preston said.