Cathy TwayJuly 23, 2019

Decarbonization of the Chemical Industry

The Global Chemistry Industry: Catalyzing Growth and Addressing Our World’s Sustainability Challenges, ICCA, March 2019 2

Before Diving In: Here Are Some Facts and Figures About The Chemical IndustryThe Chemical Industry Touches Nearly All Goods-Producing Sectors.

In 2017:

• Total gross value $5.7 Trillion = 7% of global GDP

• $1.1 Trillion directly added to global GDP = ~ GDP of Indonesia

• 120 Million jobs supported = ~ population of Mexico

• 15 Million directly employed = 14th largest city in the world

• $75,000 gross value add per employee

• $51 Billion in global R&D investment 1.7 Million jobs

3

Greater Than 50% Is FeedstocksChemicals Are The Largest Industrial Energy Consumer

Chemicals

Iron and SteelCement

Pulp and Paper

Aluminum

0

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0 200 400 600 800 1000 1200 1400

Dire

ct C

O2

Emiss

ions

, MtC

O2/

yr

Energy Demand, Mtoe

The Future of Petrochemicals, IEA, Oct. 2018

Significant Focus Has Resulted in Highly Optimized Processes

P. G. Levi, J. M. Cullen, The Future of Petrochemicals, IEA, Oct. 2018Environ. Sci. Technol. 2018, 52, 1725−1734; A. Katelhon, et al, PNAS 2019, 116, 11187’ 4

Energy Related

85%

Process Loss15%

CO2 Emission Sources

• Between 1977 and 2014, nearly 25%reduction in non-feedstock energy use

• In 2014, 58% of energy input used as feedstocks

• 1.5 GtCO2 per year – 18% of global industrial CO2 emissions

• Non-CO2 GHG emissions are 350 – 400 MtCO2-eq

Predictions from Technology Roadmap1,2 Point Out Need For Different Approaches

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500

1,000

1,500

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2,500

2010 2015 2020 2025 2030 2040 2050

Prod

uctio

n v

olum

e [k

t]

Ammonia Ethylene PropyleneACN Methanol PETPA PP Mixed XylenesPX Benzene StyreneEG VCM EOToluene Cumene POPhenol Caprolactam

Volumes Expected to Grow ~2-3X1,2

With no process improvements1,2 ,

• Energy use to increase by >110%

• GHG emissions to increase by >100%

To give 50% chance of limiting to 2˚C by 2050, 30% reduction in CO2 or75% reduction/unit of production3

1Technology Roadmap: Energy and GHG Reductions in the Chemical Industry via Catalytic Processes, International Energy Agency, June 20132https://www.iea.org/publications/freepublications/publication/name,40309,en.html

3P. G. Levi, J. M. Cullen, Environ. Sci. Technol. 2018, 52, 1725−1734

There Are Upstream and Downstream Opportunities to Reduce CO2Emissions

P. G. Levi, J. M. Cullen, The Future of Petrochemicals, IEA, Oct. 2018Environ. Sci. Technol. 2018, 52, 1725−1734; 6

Olefins

BTX

Ammonia

Methanol

Polymers

Agrochemicals

Specialty Chemicals

2/3 Energy Use

Consumer Goods

Packaging

Transportation

Construction

Agriculture

Pharmaceuticals

• Novel processes/energy optimization• Alternative feedstock and fuels• Electrification• Carbon management (CCS)

• Reduced use: novel materials, new application/forming techniques, improved performance/life, etc.

• Recycling

The Future of Petrochemicals, IEA, Oct. 2018; Decarbonization of industrial sectors: the next frontier, McKinsey& Company, June 2018 7

A Variety of Feedstocks And Fuels Are Under Exploration OR In Use

Notable Examples:• Bioethanol/ethylene in Brazil• Electrolyzers for H2

• Coke Oven Gas (off gas from iron and steel) used to generate 20% of methanol in China

Sustainably produced biomass available could supply up to 90 EJ/yr to all of the industrial sector – it can only be a partial solution for the Chemical Industry which used 43 EJ/yr in 2015

Investment Is Needed• Venture capital investments in clean tech sector have decreased

dramatically since 2011• Biomass conversion investments have dropped since 2015• Equipment costs for handling biomass ~7X more expensive

New Feedstocks Are Being Proposed For Commodity Chemicals

Adapted from Carbon Dioxide Utilization (CO2U) ICEF Roadmap 2.0, Nov. 2017 8

CO2

CH4

H2O

Direct ReactionCO2 + H2

CO2 Reforming Processes CO2 + CH4 2CO + 2H2

RWGSCO2 + H2 CO + H2O

Co-Electrolysis2CO2 + e- 2CO + O22H2O + 4e- 2H2 + O2

CH4 Reforming + WGSCH4 + 2H2O CO2 + 4H2

Electrolysis2H2O + 4e- 2H2 + O2

Syngas Routes

Fischer-TropschCO+ H2

Syngas to MethanolCO+ 2H2 CH3OH

H2

CO2 (to Geological Storage)

DME

CH4

CH3OH

Alkanes

Alkenes

One CCU Model Explored Highlights The Complexity

A. Katelhon, et al. PNAS 2019, 116, 11187 9

H2 From Water Electrolysis

CO2 From Point Source (100%)

Methanol

Methane NH3

Olefins, BTX

Results:

• Mass flows increased by 287% larger plants will be required or significant intensification will need to be developed

• 32 PWh of electricity needed 97% of projected world electricity supply by 2030

• If all additional electricity were renewable, 222% of targeted installation would be required

• If oil is $92.3/barrel, electricity is $1.8 – 3.5 kg/H2, additional operating costs would be $564-1,570 billion annually

• The additional costs would be 59-164% of 2017 market value for these 20 chemicals

• Costs for CO2 reduction would be $168-467/t CO2 equivalent

CCU Thermodynamics Are Challenging

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, kJ

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CFuels, Many Plastics, &

Primary Feedstocks

Syn-Gas Derivatives, Biomass & Oxygenates

Formic Acid and CO2Combustion

CCU

Adapted from M. Bender, et al., Chem. Ing. Tech. 2018, 60, 1.

www.carbolrecycling.is, accessed July 21,2019, Gaseous Carbon Waste Streams Utilization Status and Research Needs, NAS, 2019 11

Opportunities for CCU Exist

Carbon Recycling International’s VulcanolTM: 4,000 metric ton/year MeOH with CO2 from flue gas of geothermal power plant:

• Availability of low cost electricity for generating H2 via electrolysis

• High CO2 concentration (85-90%) from geothermal powerplant

• EU requirement for sustainable feedstocks in liquid fuels like methanol

Agreement signed in May 2019 with Henan Shuncheng Group for a 180 kta/year methanol and LNG facility using CO2feedstock

Integration and Scale Add Complexity & Opportunity

Adapted from The Chemical Industry Reimagined, EY, 2018 12

Inorganics Oil & Gas Industrial Gases

salt, ores, carbonates, silicon, phosphorous, etc.

caustic, chlorine, TiO2, silicon, etc.

natural gas naphtha heavy oil

C2s, C3s, C4s, C5s, aromatics

wax, lubricants, fuels

air gases, H2, etc.

crop protection

fertilizers

seeds

plastics, pigments & industrial coatings, adhesives, catalysts, detergents, construction chemicals, glass manufacturing,

etc.

consumer care, food additives, flavors & fragrances, paints and coatings, surfactants, vitamins, etc.

industrial manufacturing, steel production, chemical

manufacturing

Com

mod

ity C

hem

icals

Agric

ultu

re C

hem

icals

Spec

ialty

Che

mica

ls

Consumer Chemicals

Decarbonization of industrial sectors: the next frontier, McKinsey & Company, June 2018 13

McKinsey & Company 2018 estimates:

• $25/MWh renewable electricity needed for greenfield ethylene plant electrification

• $15/MWh renewable electricity needed for brownfield ethylene plant electrification

For electrification to be cost-competitive to using CCS for CO2 management

Need For Integration Consideration Evident In An Ethylene Cracker Electrification ExampleEthylene production generates 0.2 GT CO2/year or ~10% CO2of the chemical industry from fuel for the furnaces

Currently no commercial high temperature electric furnaces are available

• Expected to be more efficient than current combustion

• Less heat available for downstream processes, so they would need to be electrified as well

Current Infrastructure Build Out Adds To The Complexity

Adapted from The Chemical Industry Reimagined, EY, 2018 14

Inorganics Oil & Gas Industrial Gases

salt, ores, carbonates, silicon, phosphorous, etc.

caustic, chlorine, TiO2, silicon, etc.

natural gas naphtha heavy oil

C2s, C3s, C4s, C5s, aromatics

wax, lubricants, fuels

air gases, H2, etc.

crop protection

fertilizers

seeds

plastics, pigments & industrial coatings, adhesives, catalysts, detergents, construction chemicals, glass manufacturing,

etc.

consumer care, food additives, flavors & fragrances, paints and coatings, surfactants, vitamins, etc.

industrial manufacturing, steel production, chemical

manufacturing

Com

mod

ity C

hem

icals

Agric

ultu

re C

hem

icals

Spec

ialty

Che

mica

ls

Consumer Chemicals

Current Infrastructure Build Out Adds To The Complexity

Adapted from The Chemical Industry Reimagined, EY, 2018 15

Inorganics Oil & Gas Industrial Gases

salt, ores, carbonates, silicon, phosphorous, etc.

caustic, chlorine, TiO2, silicon, etc.

natural gas naphtha heavy oil

C2s, C3s, C4s, C5s, aromatics

wax, lubricants, fuels

air gases, H2, etc.

crop protection

fertilizers

seeds

plastics, pigments & industrial coatings, adhesives, catalysts, detergents, construction chemicals, glass manufacturing,

etc.

consumer care, food additives, flavors & fragrances, paints and coatings, surfactants, vitamins, etc.

industrial manufacturing, steel production, chemical

manufacturing

Com

mod

ity C

hem

icals

Agric

ultu

re C

hem

icals

Spec

ialty

Che

mica

ls

Consumer Chemicals

“The biggest obstacle to innovation is a paid off plant.” –From the Innovation Abyss by Chris DeArmitt

Decarbonization Is Possible

Technology development is needed to improve economics

Final solution will require multiple approaches

Willingness/ability to absorb additional costs will be important

Investment needs to be harmonized across industry and coordinate across sectors

Regulatory push and/or subsidies may accelerate transition

In science the credit goes to the man who convinces the world, not the man to whom the idea first occurs. -- Sir Francis Darwin