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Mini-Methanol Plant

Tata MESSIRI

Senior Special Assistant (DTSG/OPTS Initiative)

to Governor of Delta State, Nigeria

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Presentation format

What is DTSG/OPTS Initiative?

Why methanol?

Why small scale methanol?

Sustainability and sustainable development Economics of methanol production

Methanol production process

Small scale methanol plant parameters

Multiplier effects associated with methanol

Project Partners

Next Steps

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DTSG/OPTS Initiative

DTSG-Delta StateGovernment

OPTS-Oil Producers TradeSection of the Lagos

Chambers of Commerce INITIATIVE=To bring about

sustained and sustainablelivelihoods for the people inthe Delta State

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Why Methanol?

ESTIMATED CAPITAL COST, GAS INPUT AND REVENUE GENERATION FOR PROPOSED PRODUCTION UNITS ININDUSTRIAL ESTATE CLOSE TO OIL FIELDS

S/N

PLANT ESTIMATEDPLANT

COST ($MILLION

ANNUAL GAS INPUT

PRODUCTS

ANNUAL OUTPUTS

RATIOPRODUCTVALUE TO

GAS INPUT

QTY(BILLI

ONSCF)bscf

COSTOF

GAS($/SCF)

COST($

MILLION) QTY UNIT

PRODUCTUNIT

COSTS ($)

PRODUCTVALUE ($MILLION)

1 LPG Plant 25 20.00 0.255.000

LPG(12.17%) 142,930 tonnes 150 21.440

7Dry gas(85.10%) 17,000,000 000scf 0.5 8.500

Condensate(1.61%) 300,400 bbls 20 6.008

2 Methanol 20 1.13 0.50 0.565 Methanol 32,000 tonnes 180 5.760 10

3 Ammonia 25 1.05 0.50 0.525 Ammonia 32,000 tonnes 200 6.400 12

4

Ammonia/UreaComplex 45 1.05 0.50 0.525 Urea 55,680 tonnes 200 11.136 21

5CarbonBlack

80 2.40 0.501.200

Carbon black 40,000 tonnes 1,000 40.000

33Hydrogen 5 bscf

Energy

6DirectReducedIron (DRI)

225 6.73 0.503.365

DRI 600,000 tonnes 120 72.00021

Off gases

7Bioproteins 45 0.90 0.50 0.450 Bio proteins 10,000 tonnes 1,000 10.000 22

8

CassavaStarch,ethanol,methanol

0.50-

Cassava

Starch

9

Powergeneration(50 MW) 25 3.74 0.50 1.870

ElectricalPower 438,000 MWh 50 21.900 12

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Why small scale methanol?

It takes about 8years for permitting and construction ofa large world scale methanol plant. A small scalemethanol plant can be up and running in about 2 years.

The agitation and unrest in the Niger Delta will not waitto be resolved in 8years time.

Moreover, several small scale plants will employ morepeople than one large scale plant.

Small methanol plants are less sophisticated andtherefore more appropriate for developing countries

However, there is a problem today for small oil fields inDelta (250 or more), some of which have to installgathering lines for associated natural gas at prohibitivecost. These fields with small natural gas (only4mmSCFD) can support a 100tonne/day methanol

production plant. If a small plant were to have favorable financing and

low-cost gas, it could in fact be competitive with thelarge plants in a local fuel market.

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Sustainability and Sustainable development

Sustainable DevelopmentHelping mitigate CO2 emissions (global

environment)Improving health & standards of living, reducing

poverty (social pillar)Increasing local employment and productive use

(economic pillar)Reducing deforestation and improving indoor air

quality (local environment)Energy interacts with peoples lives in many

different ways, from the basic survival activitiesto increasing productivity.

Productivity can be increased by extending the

working day with lighting and by mechanization.It can free up their time, improve their health

and well-being, and open up opportunities.Energy services can contribute in a number of

ways to the efficient performance of healthcaredelivery system, for example, through ensuringreliable heating, lighting, sterilization andrefrigeration, as well as safe disposal of medicalwaste.

Use of biomass fuels for cooking and space

heating creates indoor air pollution, which hasbeen linked with increased rates of acuterespiratory tract infection (ARI) in children

Why can methanol be the bridge tosustainability?

Methanol can be made at low cost from natural gas

There is enough flared gas in Nigeria to supplyevery family in Sub-Saharan Africa with methanolfor cooking fuel.

Methanol is a splendid cooking fuel, and there hasbeen in use for decades a very efficient stove inwhich to burn it.

Methanol can eventually be made from biomass byknown technology when we learn to produceenough biomass sustainably at low cost.

Methanol is a nearly ideal fuel in internalcombustion engines or for fuel cells, and an equallyideal fuel to replace the still enormous consumptionof wood as a cooking fuel in developing countries.

Its use will eliminate the smoke and soot producedin the household when wood is burned, and willreduce household CO2 and greenhouse gas (GHG)production by about 5/6 when compared to usingnon-replaced forests for fuel.

It is also very attractive as a replacement for themore expensive and valuable kerosene, which has

enormous liabilities as a household fuel.It is handled as a liquid but burns as a gasIt does not require expensive cylinders and

regulators to be deployed.

Biomass vs. Commercial Energy in Nigerian and Sub Saharan Africa

Biomass(mtoe) Oil Products(mtoe) Electricity(mtoe) Biomass(%) O ilProducts(%) Electricity(%)

Nigeria 60,212 866 834 97.3 1.4 1.3

Sub Saharan Africa (12) 114,043 2,016 1,710 96.8 1.7 1.5

Source: IEA: Energy Statistics and Balances of Non-OECD Countries, 1997 (1999 Edition)

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Economics of Methanol production

Projected Plant Price for Current 5000 tpd Plants UnderConstruction

Capital

Battery limits ($233/annual ton) $384,000,000

Off Sites (58/annual ton) 96,000,000

Total ($291/annual ton) $480,000,000

Plant Price $/ton /gal /liter

Capital charge 50.6 15.2 4.0

Feed and Fuel 8.3 2.5 0.66

Plant operating and maint. 16.7 5.0 1.32

Selling & Admin 1.7 0.5 .13

Total Plant Price 77.3 23.2 6.11

This plant price assumes 330 days per year operation at full capacity.Capital charges are based on 30% equity, 70% loan at 10% interest perannum payable over 10 years (usual commercial rates).

A more likely scenario would be 80% of the above assumed capacity Thisraises the plant price to $94 per ton (28 cents/gal, or 7.4 cents/liter). Thisis at the plant gate. If cognizance is taken for transportation from far fromsmall users and repackaging into small lots, we arrive at cost closer totwice this amount say 56 and over per liter. This costs we already have

where refined petroleum products are costing 2 3 times in the riverineareas what it costs in the urban centers.

Projected cost for methanol from modular plants

/gallon /liter $/ton

Salaries 2.0 0.5 6.7

Feed and Fuel 3.1 0.8 10.3

Purchased Power 0.1 0.0 0.3

Catalyst and Chemicals 0.9 0.2 3.0

Maintenance on Plant 4.9 1.3 16.3

Raw Water 0.1 0.0 0.3

Insurance and Taxes 1.7 0.5 5.7

Capital Charges 23.8 6.3 79.3

Total 36.6 122.0

Small scale plant is built on a modular skid mounted basis and so does notobey the 0.67 capacity factor rule but is in fact about 67% of what usingthe 0.67 factor rule would have cost.

Capital charges assume 30% equity, 70% loan at 8% interest per annumpayable over 15 years. This is a leveraged loan through multilateral aidorganizations, GGFR or other mechanism. Even at this capital charges arestill about 150% that for a large scale plant.

When transportation fees and lower than100% capacity utilization is takeninto consideration, price to consumer would be between 40 and 70 per

gallon or 10 to 18 per liter.

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Methanol Production Process

25-100 TPD

FeedPretreatment

Steam Reformingand HeatRecovery

Cooling andCompression

MethanolDistillation

MethanolSynthesis

Hydrocarbon Feed

Methanol Product

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Small scale methanol plant parameters

Process

Desulfurization of natural gas

Catalytic Steam/HydrocarbonReforming

Heat Recovery from Process

Gas Synthesis Gas Compression

Synthesis Gas Loop

Methanol Distillation

Units

Reforming System and HeatRecovery

Methanol Synthesis Loop

Methanol Distillation

Offsites

Feed Natural gas composition

Methane 79.62%(v) approx.

Sulfur 10ppm(v) max

LHV 9,104kcal/ncm

HHV 10,054kcal/ncm

Product methanol composition Methanol 99.85%(wt) min.

Water content 0.5%(wt) max.

Specific gravity 0.7885 max

Utilities requirements

Natural gas 1,008 ncm/mt

Raw water 2,069 kg/mt

Nitrogen(startup)75ncm/hr for 8hrs

Electrical power 552 kwh/mt

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Methanol fuelled

absorption cooling

Methanol fuelled lantern

Methanol fuelled microturbine

Methanol fuelled cookstove

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Deforestation can be arrested by the use ofmethanol cookstoves

Flaring reduced from conversion of associatedgas to methanol

Power generation can be fuelled with readilyavailable methanol

Agro-processing can be increased fromavailability of commercial energy

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Methanol in our lives

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Desirability of small scale methanolprocessing for oil producing areas in Nigeria

Methanol can be in made in small scale

modular plants from stranded flared gasthat would be difficult or uneconomicalto transport for processing to LNG orother facilities by pipeline therebyachieving faster flare down

Methanol burns as efficiently as aliquefied petroleum gas

Methanol would be cheaper to produceand is more available than kerosene

Methanol is soluble in water andtherefore easy to extinguish inhouseholds

Methanol is easier to transport andmarket than liquefied petroleum gas; anddoes not require pipeline infrastructurelike natural gas

Methanol will therefore act as areplacement for both wood and liquefiedpetroleum gas

Methanol can be mixed with ethanol toachieve the ongoing Federal Governmentinitiative to link rural development to theenergy sector

100t/d methanol plant will provide

cooking energy for 125,000 families Each 100t/d methanol plant will mop up

4mmcfd of flared gas 100t/d methanol plant will prevent the

cutting of 500t/day of wood, replaceabout 100t/day of kerosene or liquefiedpetroleum gas.

Methanol availability and use willimprove productivity in the rural areas

where over 70% of our population live. Methanol use as a household fuel will

improve indoor air quality, reducedeforestation and reduce flaring.

Nigeria with a population in excess of120 million can accommodate 200 nos100t/d plants. There are over 250 smalloilfields in the Niger Delta and this is anopportunity to generate economicactivity and employment in thesecommunities.

The fuel methanol industry will improvepower availability through micro andmini power generation

Methanol availability will jumpstart thechemical industry based on methanol-formaldehyde, synthetic glues, acetic

acid, vinyl acetate, etc.

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Project Partners

Delta State Government,through its Ministry of Powerand Energy

Bayelsa State Government

Centre for Household Energy

and Environment (CEHEEN), aDelta region NGO specializingin stoves and householdenergy

Local business interests

Methanol production Stove production

Lantern production

Refrigerator production

Internal combustion enginemodification

Dometic AB, a Swedishcompany, alcohol stove andappliance manufacturer

HydroChem, a Division ofLinde AG and producer of

small-scale gas synthesisequipment

SASOL Chemicals, a producerof synthetic ethanol andmethanol in South Africa

The United StatesEnvironmental ProtectionAgency (USEPA) "Partners forClean Indoor Air"(PCIA)

United Statas Agency forInternational Development

(US AID)

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Preliminary indications from pilot study

LOW-/MEDIUM-INCOMESECTORS

Kerosene will be displacedbecause it is more expensive,less efficient, indoor air qualityis impaired when used, etc.

Fuel wood will also bedisplaced because of itsconvenience, better indoor airquality.

Price of the stove and fuel willbe a deterrent.

Use of micro-credit could offsetthis deterrent.

CERs can play a decisive roleand it would be innovative withconsumers being the actualbeneficiaries of their savings tothe climate

HIGH INCOME SECTOR LPG will be displaced because

of unavailability of product anddisadvantages associated withpackaging in heavy pressurizedcylinders.

Electric cookers will also bedisplaced because of regularand unpredictable poweroutages.

Cost is not an issue.

If a CDM methodology can be

developed CERs due from theproject can be applied for thepurchase of stoves for lowincome users.

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Next Steps:

The GGFR Initiative should support

WIN-WIN scenarios related to the 3pillars of sustainable development economic, social, environment.

Developing small-scale use ofmethanol at local / regional level willtake advantage from use of flared

gas, helping mitigate CO2 emissions (globalenvironment)

while improving health & standards of living,

reducing poverty (social pillar) increasing local employment and productive

use (economic pillar) reducing deforestation and indoor air

pollution (local environment) Economic empowerment of the oil

producing communities will reducethe unrest and restiveness therebyimproving operating profits andimage of IOCs and government

Sign MOU with all Methanol Alliance

parties Carry out detailed feasibility studies

and business plan Identify stranded associated gas fields Put in place political and other

necessary risk guarantees

Match local and internationalinvestors and partners Develop a CDM Methodology for the

project Develop a micro-credit scheme for the

financing of purchase of the stoves Need support from GGFR partners

active in Nigeria Federal Government of Nigeria Shell Petroleum Development Co. ChevronTexaco World Bank/IFC