U.S. Shale Gas versus China's Coal as Chemical Feedstock.

T United States and China are pursuing different choices of hydrocarbon feedstock for making chemicals. While the U.S. chemical industry is increasingly utilizing shale gas as feedstock to produce olefins and methanol, China is developing coal-to-olefins and coal-to-methanol. Shale gas chemicals are cheaper and cleaner than coal-based ones. By replacing those high-carbon coal-to-chemicals, the U.S. export of shale gas chemicals will be both profitable and environmentally beneficial. Ethylene, propylene, and methanol are the three most important building blocks in the chemical industry. In 2014, the world consumed about 160 million metric tons of ethylene, 90 million metric tons of propylene, and about 70 million metric tons of methanol. Ethylene and propylene are often grouped together with other alkenes and referred to as olefins. Olefins are made from steam cracking of hydrocarbons, with naphtha as the most common feedstock, followed by ethane and propane. Since the shale revolution, surplus of ethane and propane has triggered an investment boom in ethane crackers and exponential growth of propane/propylene exports. The announced projects are expected to increase the U.S. olefins production capacities by 14 million metric tons by 2020. The cheap and abundant ethane and propane provide the U.S. chemical industries with several competitive advantages. Manufacturing olefins from ethane and propane is cheaper, simpler, consume less energy, and less polluting than naphtha cracking. Meanwhile, China is pursuing the development of coal-toolefins (CTO). China’s 12th five-year plan (2011 to 2015) for olefins industry listed the development of CTO as a top priority. With favorable policies, China’s CTO production capacities have grown from 1.1 million metric tons per year in 2010 to 6.5 in 2014, and are expected to reach 12.4 by 2016. Coal-to-olefins requires high capital investment, complex processes, high energy consumption (therefore high carbon dioxide (CO2) emissions), and high water consumption. Despite the technical disadvantages, China is quickly building a coal-to-olefins industry with favorable government policies. For each metric ton of olefins output, ethane-to-olefins emit about 0.8 t of CO2, naphtha-to-olefins emit about 0.9 t, 1 whereas coal-to-olefins emit about 5.8 t. Similar dichotomy appears in the feedstock choice for methanol in the United States and China. While the U.S. companies are aggressively expanding methanol production from natural gas, China is building coal-to-methanol capacities. In the United States, the announced methanol projects are expected to increase the nationwide methanol production capacity from 1.6 million metric tons in 2013 to over 12 million metric tons per year by 2018, and nearly 30 million metric tons per year by the early 2020s. Because the U.S. domestic consumption of methanol has remained relatively stable at about 6 million metric tons per year, the expansion will transform the United States from a net importer to a major exporter. China is the world’s largest methanol consumer and the major target for U.S. methanol export. In 2014, China consumed about 41 million metric tons of methanol, which account for 55% of global demand. Meanwhile, China has been building a unique coal-tomethanol industry. Many coal-producing regions encourage investments in coal conversion to boost demand for coal. China has already more than enough methanol production capacities to meet its demand, yet it continues to build more. Coal-tomethanol is carbon intensive. Making a metric ton of methanol from coal emits roughly 5.3 t of CO2, while making the same amount from natural gas emits only 1.7 t. The capital investment for a coal-to-methanol plant is roughly twice as much as a methane-to-methanol plant of comparable capacity, while the feedstock costs are comparable. The capital cost of coal-to-olefins is nearly four times of that of an ethane steam cracker, with comparable feedstock costs. In terms of operation and maintenance (O&M) costs, such as catalysts, water, energy, and pollution treatment, coal-tochemicals are all much more expensive than shale gas chemicals (Figure 1). Due to great cost advantage, aggressive expansion of U.S. shale gas chemicals could eventually force some of the Chinese coal-to-chemicals producers out of business, and contribute to carbon mitigation by replacing the high-carbon coal-tochemicals.