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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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