The Story of Ethylene – Now Starring Natural Gas

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It’s a $160 billion a year market you’ve probably never heard of.

Ethylene, the intermediary chemical compound from which popular plastics and many other high value products are derived, has traditionally been made in the petroleum industry via steam cracking, an energy- and carbon-intensive process. It’s the most produced organic compound in the world; annual global production is in the hundreds of millions of tons. To meet ever-increasing demand, production facilities are being added globally, particularly in the Persian Gulf and China.

The problem is, it’s complicated and expensive to make ethylene. And, or course, petroleum reserves are waning.

For decades, chemical engineers have been pursuing cost effective ways to make this key industrial compound from other things. Now, a handful of companies think they’re honing in on ways to make ethylene from the methane in natural gas with commercially viable processes.

If making ethylene from methane turns out to be possible at scale, it could be a watershed for the chemical and petroleum industries. Ethylene from methane could potentially be much less expensive, given that natural gas is one-fifth the price of oil. And its supply could be more sustainable, given the massive and growing size of natural gas reserves.

The methane conversion space is more crowded than one might expect. Kachan & Co. recently performed a consulting project for a client that uncovered and profiled 24 announced and stealth mode startups in this space, along with 19 blue chip companies and 6 universities and government labs. The project involved interviews with company and research personnel, a review of venture investment data, interviews with investors and trade organizations, an intellectual property patent search and a literature review that included media and scientific sources.

Here are some of the more interesting of the 24 small organizations we found at the forefront of methane-to-ethylene commercialization today:

Co. Name HQ Website Type Dev. Stage Tech Description Partners or Alliances Investors
Carbon Sciences Santa Barbara, California www.carbonsciences.com Public Experimental phase Reforming methane to syngas to fuel using advanced catalysts. Emerging Fuels Technology (EFT) & University of Saskatchewan N.A.
Fertilizer Research Institute Pulawy, Poland www.ins.pulawy.pl  Polish national research lab Unknown Currently operating a pilot methane to ethylene facility based on oxidative coupling of methane (OCM). Governmental facility N.A.
LanzaTech Auckland, New Zealand www.lanzatech.co.nz Private Prototyping, commercialization in 2013 Gas fermentation process that produces both fuels and high-value chemicals from low-cost resources such as steam-reformed methane. N.A. Series A investment from an investor consortium led by Khosla Ventures; Series B financing led by Qiming Ventures.
Quantiam Technologies Alberta, Canada www.quantiam.com Private Research & development  Working on a feasibility study on a novel catalyst for methane conversion. BASF, IRAP BASF ($3M), Ursataur Capital Management ($3M), Small investors ($2.3M)
Siluria Technologies San Francisco, California www.siluria.com Private Research & development A “revolutionary approach combining the latest developments in nanomaterial science, biotechnology and chemical engineering.” New type of oxidative coupling of methane (OCM) process. None disclosed Wellcome Trust, Alloy Ventures, ARCH Venture Partners, Kleiner Perkins Caufield & Byers, Altitude Life Science Ventures, Lux Capital, Presidio Ventures. $13.3M Series A. $20M Series B.

Excerpt from private Kachan & Co. study of 24 methane to ethylene companies, October 2011

The companies we found worldwide pursing methane-to-ethylene arranged themselves into rough groupings by type:

  • IP Provider: Develops IP related to methane-to-ethylene, does not go beyond IP phase
  • Technology Provider: Developed a technology and a prototype, intend to license to other companies (e.g. Carbon Sciences)
  • Application Provider: Developed a technology, and sells engineering services to build facilities (e.g. BCCK) or manufacture technology (e.g. Rentech)
  • Technology Operator: Goes beyond the licensing and directly operates facilities (e.g. CompactGTL) 

Global oil and gas majors have been working on the challenge of methane to ethylene for years themselves, with dozens of patents issued. But none have cracked the code of profitable commercial scale production.

Global oil majors and number of patents in converting methane to ethylene

Chevron 80
Exxon Mobil 72
Shell 54
BP 29
BASF 17
Nippon Oil 14
Innospec 10
Lubrizol 9
Celanese 7
Saudi Basic Industries Corporation 5
Total Raffinage 5
General Electric 5
Honeywell 3
Cosmo Oil 3
Eni S.p.A. 3

High value chemicals like ethylene from natural gas would be even more compelling if the gas was derived from renewable, biological sources, and not from conventional reserves or fracking, as today. Small volumes of renewable methane are available today from anaerobic digestion and landfill gas. But large volumes are promised by a new wave of companies commercializing thermal gasification and other approaches to creating bio natural gas from wood waste and other widely available feedstocks (see the Kachan report The Bio Natural Gas Opportunity).

Complicated science aside, it won’t be easy for companies to bring methane to ethylene innovations to scale. Ethylene and other high value chemicals today are an oligopoly, a market hard to crack. Any new process will likely need to be championed by one of today’s 5 big suppliers as a partner to enter the market. Then there’s the culture clash between small, fast-moving venture backed companies seeking quick exists and the notoriously slow, conservative petroleum and chemical industries.

But those challenges are likely surmountable, according to the bets that are being made by name brand cleantech venture backers of the companies in this space.

Article by Dallas Kachan, appearing courtesy Kachan & Co. A former managing director of the Cleantech Group, Dallas Kachan is now managing partner of Kachan & Co., a cleantech research and advisory firm that does business worldwide from San Francisco, Toronto and Vancouver. Kachan & Co. staff have been covering, publishing about and helping propel clean technology since 2006. Kachan & Co. offers cleantech research reports, consulting and other services that help accelerate its clients’ success in clean technology. Details at www.kachan.com.

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Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.

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