Future of Green Methanol: Challenges and Opportunities with Eric Bober - Ep 170

Discover why methanol has become the number one alternative fuel for ships ordered in 2023 and how the race for environmentally improved methanol is shaping the future of the chemical industry. Eric Bober, Senior VP at NexantECA, joins host Victoria Meyer on The Chemical Show® to dive into the evolution of green chemicals, the urgent demand for sustainable methanol as marine fuel, and the gap between innovation and infrastructure. 

Victoria and Eric explore the groundbreaking advancements and the hurdles companies face in project development and market segmentation, all while highlighting the critical role of consortiums and government incentives in driving progress. Further discussing the importance of balancing traditional technology with innovative solutions, Victoria and Eric shed light on carbon capture and the strategies to mitigate risks and propel the industry forward. As the push for decarbonization intensifies, hear how methanol’s journey from commodity to green powerhouse is poised to reshape the chemical and shipping industries.

Tune in to hear Victoria and Eric discuss the following topics:

• Green Methanol: the revolution continues and the evolution is currently "bogged down"
• Methanol as a shipping fuel
• Decarbonization: Who's paying for it? 
• Leveraging the strengths and advantages of methanol
• Solutions to speeding up environmentally improved methanol
• Methanol's future outlook
  
  

Killer Quote: 
"If you build it, they will come. And I think in this case, they're coming, so we need to build it. The ships are coming. They're going to come starting next year. And if we can have environmentally improved methanol, the ships will use it." - Eric Bober

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Here's your host, Victoria Meyer.

Victoria: Hi, this is Victoria Meyer.

Welcome back to The Chemical Show,
where Chemicals Means Business.

Today, I am speaking with Eric Bober,
who is the Senior VP at Nexant ECA.

And Eric, you might recall, was
on The Chemical Show earlier

this year on Episode 148.

So if you haven't listened
to it, go check it out.

Eric and I are really continuing this
conversation about green chemicals,

evolution and revolution, and diving
a little bit deeper into methanol.

So, Eric, welcome to The Chemical Show.

Eric: Thanks very much, Victoria.

Great to be here.

Victoria: Yeah, absolutely,
happy to have you back.

Um, so, let's just jump right in.

What's changed?

So, we talked earlier this year, and
it seems like this is a year, and of

course it's a decade, that everybody's
very focused on green and sustainability

and getting to some new molecules.

What's changed since we last talked?

Eric: Well, when we talked last time, one
of the main issues we talked about was how

in terms of green chemicals in general and
green methanol, in particular, the markets

were demanding revolutionary results,
but it takes an evolutionary approach.

And what's changed is the revolution
continues and the evolution

seems It's to be bogged down.

Victoria: Yeah.

So what does that mean?

So how, why, how are we bogged down?

Eric: So there's a lot of pent up demand
for environmentally improved methanol.

So one application for that
will be as a bunker fuel and

as a marine fuel for ships.

Victoria: Yeah.

Eric: And there's been hundreds
of ships that have been ordered.

And in fact, in 2023, there were
about 135 ships ordered that

could use methanol as a fuel.

It made methanol the number one
alternative fuel for ships ordered in

Victoria: Wow.

Eric: And those ships are going to start
coming on stream starting next year.

So

in 2025, 2026, 2027, we're going
to have ships coming on that could

use methanol, but we haven't really
had a lot of methanol projects

break ground to meet that demand.

Victoria: So is there enough methanol
already built to meet that demand?

Or, or what happens if, if we don't have
that um, corresponding development and

investment in the methanol business?

Eric: So those ships would like to
use environmentally improved methanol.

There will be gray methanol.

lacking is the environmentally
improved methanol.

It looks like we're going to
have steel on the seas before

we have steel on the ground.

Victoria: Yeah, that's interesting.

Well, certainly one of the things I
heard earlier this year, I attended

S&P Global's WPC, World Petrochemical
Conference, and, and there was a lot

of conversation about shipping and
decarbonizing shipping and, one of the

questions people asked, well, this is
all fine, but who's going to pay for it?

I think, you know, so there's this
concern that green methanol is higher

priced methanol or not, maybe not higher
price, a higher cost basis, right?

Because it's expensive,
at least initially, until

the cost curves come down.

And the question is, you know,
who's going to pay for it?

Maybe that's one of the things
that's slowing us down a bit

in the development of it.

Eric: It could be.

There are subsidies available.

There are grants available.

So there's There's carrots.

There's help to build a plant.

There's help in terms
of subsidies to prices.

So we need to sort of get the ball
rolling and get some steel on the ground.

What we're seeing now is
a lot of announcements

but the announcements are not
coming through to reaching financial

close and starting construction.

So we need to sort of get over
that hump, get through the valley.

Um, some call it a valley of
death where projects die, but we

need to get through and get some
of these projects really going.

Victoria: Yeah.

So it's interesting.

So I know you and Nexant ECA work
pretty closely with a lot of companies

that are, um, developing projects.

What are the challenges
that they're facing, um, and

maybe even the opportunities?

How do you, how are you seeing them trying
to overcome this challenge and get there?

Eric: Developing any project is hard.

Project development is very difficult.

It's a long road, but what we need
to do is with all of this pent

up demand, we need to translate
that demand into consumption.

So that takes developing a project,
making an investment decision,

building the project, and actually
turning that into production that

can be consumed to meet that demand.

So project development is very difficult.

You need a, you need to overcome
many risks and it's even harder

for a project with a new technology
or with added technologies.

Victoria: Yeah.

So do you see any front runners
or are there things that front

runners are doing differently?

Eric: One of the things we see
that we really like is companies

that are forming consortiums.

So let people concentrate on their
core strengths and partner with other

companies that can help them, whether
it's with raw material supply, whether

it's with the offtake agreements,
whether it's on the shipping end itself.

So we like for people to partner
with others that have strengths

that can compliment their own.

And we are sometimes part of that.

So there's an increased need for advisors
in a project development process that

involves new technologies to help
investors and lenders understand and

mitigate the risks that will be involved.

Victoria: Yeah, makes sense.

And, and do you see this growth
happening more or less in one region?

So what I think about this, and this
is my simple view of the world, you

know, so a ship that's built that's
designed to be able to run methanol,

You know, maybe it's picking, it's
refueling, uh, let's just say in the U.

S.,

and it's picking up its load of product
to go, let's just say to Asia, although

I don't, you know, yeah, it could go,
ships go back and forth between Asia.

What it's taking back and forth
is somewhat of a mystery at times.

It feels like it's, uh, often a
one directional load, but I would

imagine it's not just that we
have to be satisfying the demand

for green methanol in one region.

That the shipping companies need that
demand and supply satisfied in all the

regions that they're shipping between.

Is that true?

Eric: It's very true.

It's very true.

And that's actually one of the
strengths for methanol as opposed

to other alternative fuels.

Methanol is very shippable.

It already has a global
infrastructure established.

It's safer to use than many other fuels.

It's liquid.

It's already proven as a fuel as well.

I recall working with a client that told
me that in the 1980s, when methanol was

being tested for its ability to be a fuel
for vehicles for personal automobiles.

He actually had a test car for
six months fueled with methanol

and he said it drove great.

There was no difference to him.

He only had to go to the
methanol pump to get refueled.

So there's a lot of
advantages of methanol.

And I think those strengths need to be
leveraged better than they are currently.

Victoria: Yeah.

And is this a, so I know you
talked about consortiums.

Um, I mean I think there's the other
aspect is maybe government incentives.

Is that the other way that
we're going to get there?

Eric: There's.

Two different ways to do it.

One is incentives and one is penalty.

So it's carrots and sticks and
they're both working in different

regions and in different ways.

Here in, in the U.

S.

we have mostly carrots.

So it's incentives to
help build, to help run.

In Europe, they're
looking more at penalties.

So increased costs if you don't
comply with the targeted green

and, and environmentally improved.

Um, benefits of the products.

victoria_3_05-21-2024_133600: Given
that we say that we're still long,

is there really an incentive to
build other than managing carbon?

Is there ways to manage carbon?

How are companies thinking about the
fact that maybe they're actually already

operating in a long market environment
and do they have the economics made

to, to support that new investment?

eric_3_05-21-2024_143600: One of the
aspects I worry about, and I wonder if

it's one of the things slowing us down.

Is cannibalization.

So people who are already in the
methanol market, if they have product

that they're already selling into the
market, this new environmentally improved

methanol, I wonder if they're worried
about it displacing their current

victoria_3_05-21-2024_133600: Hmm.

Hmm.

That makes sense.

And then, is, is there, what's the role
of kind of private investors in methanol?

Because it felt, seems like at least
for a while, methanol investment

was a little opportunistic, right?

That, that the projects were being
built, many projects were being

built by project developers, not
necessarily by operators and marketers.

What do you see today?

eric_3_05-21-2024_143600: It's
an interesting observation.

And when I see project developers coming
into our market, I always think that means

it's a good market because the project
developers are looking to come in and,

and develop the project and make money.

victoria_3_05-21-2024_133600: Yeah.

eric_3_05-21-2024_143600: they're
seeing opportunity and I think they're

seeing opportunity in methanol again.

I think under the surface we have
project developers that are targeting

this sector because they see a long term
future in it, especially to help in that

shift from traditional fossil product
to environmentally improved product.

victoria_3_05-21-2024_133600:
Yeah, makes sense.

And, and so there's, there's, in the
long term, there's money to be made.

We just have to get there.

eric_3_05-21-2024_143600: Yes.

Victoria: Yeah, yeah, yeah.

Alright, so, so I'm going
to take this back a bit.

So the, the green in green
methanol is because of the energy.

Am I right, or is there actually a
different technology that gets us there?

Eric: So another benefit of methanol,
there's a lot of ways to get there.

And that's why I like to talk about
environmentally improved and not green or

blue or pink or turquoise or aquamarine.

So we're looking at products that have
lower carbon intensity, lower CI scores.

So provide, um, a product that has
less of an impact on the environment

and the extent to which you go
down that road really depends

on the markets you're serving.

And with methanol, you can do
that with different feedstocks.

You can do that with different process
technologies, and you can also do

that by managing what's emitted
from your plant, whether that's

actually emissions or how your
product itself is handled.

So there's a lot of opportunity.

What we're seeing a lot of
is small projects that are

using fully new technologies.

So, like you said, what people
refer to as green, so electrolysis

provided hydrogen, maybe captured CO2.

But what we could use to get there
is more traditional plants that have

carbon capture attached to them.

And then you need to have something
to do with your CO2.Whether that's

sequestering it or selling that or
reusing that, but those traditional core

technologies with maybe an addition of
something like carbon capture, I think

can get us over the hurdle a lot faster.

Victoria: Yeah.

Yeah.

And certainly I think if, if
we think about, um, I guess

just the different regions.

I think about Europe, and Europe
obviously has an energy issue.

More so than the other regions do, or, or
maybe sooner than other regions do, right?

So they're active, both from a
policy perspective, but also just

from an availability perspective.

They're shifting, um, pretty
hard towards green energy, right?

Do you see them using different
technologies ultimately, and is Europe

even really investing in this space,
because it feels like investment in

Europe is challenging at the moment.

Do you see them trying to get there
faster, just because they have

to, the whole necessity of it?

Eric: It is difficult in Europe.

They have challenges, but
everybody in different regions

has their own challenges.

And we do see it in Europe.

We do see people trying to
develop projects in Europe.

Like you said, they may be conceptually
different from projects you see in

Asia or projects you see in America.

But, they are trying to get there as well.

Victoria: Yeah, yeah, I
mean I think that's true.

How do we speed things up?

Because, and, you know, we talked about
this as being, um, revolution versus

evolution, and we need the evolution.

of developing the, as you
say, environmentally improved

methanol, um, to catch up.

What are the solutions that you see
coming to, to help resolve this?

Eric: Let me answer that two ways.

One is sort of a stop gap
and one as a longer term.

The stop gap is we have
plenty of methanol.

Old fashioned methanol, natural gas based,
some would call gray methanol or brown

methanol from coal, and that could be
used in these ships as an interim, and

it actually could be beneficial in that
it can prove that methanol is viable as a

fuel, it could prove out the supply chain.

But it doesn't get us to the
environmentally improved, uh, end

point that we're all hoping for.

And I think for that, I think
this consortium concept is good.

I think, I think to one particular
client that we've worked

with over the last six years.

So they've been trying to
develop a project for six years

and I think they'll get,

Victoria: long and short in
the project development world.

Eric: it is, it is.

Um, I'm hoping they get to
financial close this summer and

we'll break ground in the fall.

But what they've done is, is
they've looked for partners.

They've looked for people to help
them with feedstocks, to help them

with technologies, to help them with
the ever important offtake agreement.

And we've helped them with their
marketing plan, as well as with technology

assessments and risk mitigation.

And one of the things they've done very
effectively is market segmentation.

So they've looked at the market and
thought about where could their particular

product with their CI score earn the
most in terms of netbacks to the plant.

And it's something I've done
personally in my career.

I ran a product line.

I was a product manager when recycling
became popular and we developed a

recycled version of our product.

But it costs more, there was
dirt in the raw material.

We had to run our lines slower.

Uh, we had more off spec products and
all these things increase the cost.

So I wanted to charge
more for the product.

But the boss, the senior vice president
that ran the business said, no way

you have to sell it at the same price.

So.

I look for market segments that
would volunteer to pay more.

I looked for market segments for
which a recycled product would earn

them more money or more market share.

And I found one and I developed
the business with the number one

customer in that market segment.

And they were happy to offset my added
costs because the recycled version

of the product added a lot more value
for them and their customers then

I was charging them an upcharge.

So we need to do that.

We need to, to get back to marketing
basics and look for the segments that

can provide the value that you need.

Victoria: Yeah, certainly.

And I think, I think we are doing
that maybe, in some product areas

more than others, I think, um, you
know, we often think of methanol as

a truly commoditized basic chemical.

So, um, it's, uh, maybe easy to think
that there's limited market segmentation,

but to your point, It, it is there.

And there's certainly some markets
that are probably willing to pay

more than others and can, and frankly
just the affordability of the higher

cost, um, methanol, environmentally
improved methanol is there.

Do you have any hypotheses on
that that you'd like to share?

Eric: Well, I don't want
to get into specific market

but I, but I think, I
think they are there.

I really do.

I think that, um, you know, methanol
had a big thing when methanol came

and it went from zero to adding
incremental demands that made MTO

the number one market segment for

Victoria: Yeah.

Eric: Methanol is a very versatile
product, and the opportunity to use

methanol as a marine fuel could be
the next big thing for methanol.

And there's other opportunities as well.

I'd love to see, this is just a personal
love, if we can use environmentally

improved methanol to make green plastics
through MTO, conceptually, it's easy.

So

Victoria: Everything's easy conceptually.

Eric: With the strong push to green
plastics, I wouldn't be surprised

to see green plastics made from
environmentally improved methanol,

even here in the united States.

Victoria: Where, is most of
the MTO work happening today?

I

Eric: it's in China

Victoria: do we have, it is China,
and do we have really commercially

viable MTO technologies in place?

Eric: Absolutely.

Victoria: Okay.

Eric: And one other market segment I was
going to mention is methanol to jet fuel.

So, Ethanol to jet fuel and alcohol
in general to jet fuel has been

talked about for a long time.

But now that the excitement is around
potentially methanol to jet fuel.

Victoria: Okay.

And so this would be a form of SAF,

I guess?

Uh, Sustainable Aviation Fuel, it's
the lingo we're all supposed to know.

One of the many acronyms.

,

Awesome.

Um, so what else, what should
we be looking for then in terms

of kind of timing to get there?

What we should be expecting over
the rest of the year when we think

about Methanol, green methanol and
environmentally improved methanol.

Eric: Well, as I was preparing for this
session and I was thinking about the ships

coming on stream starting next year, I, I
thought of the old movie, Field of Dreams.

If you

remember the quote from that movie
was, "If you build it, he will come."

And I think in this case, They're
coming, so we need to build it.

The ships are coming.

They're going to come starting next year.

And if we can have environmentally
improved methanol, the ships will use it.

Victoria: Yeah, absolutely.

I think it's a great point.

Well, Eric, this has been
a great conversation.

I think, uh, learned a lot more about
what's going on in the world of methanol,

and I think this is really one of the
foundational chemical products that

connects us to the shipping industry and
to a large consumer that, as you pointed

out, really has potential to decarbonize.

And in many ways it's being asked
to decarbonize perhaps faster

than some other industries.

So it'll be great to see how
this continues to develop.

Eric: I agree.

Thank you.

Victoria: Yeah, absolutely.

Well, thanks for joining us today.

And thanks everyone for joining us
on this episode of The Chemical Show.

Keep listening, keep following, keep
sharing, and we will talk again soon.

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