SES' Rigdon: Boosting Coal's Role

SES' Rigdon: Boosting Coal's Role
For Houston-based Synthesis Energy Systems (SES), China and the United States are key markets for building demand for coal-based fuels and chemical products.

Both China and the United States depend heavily on crude oil imports, but they do boast an abundance of another fossil fuel: coal. In fact, just these two countries hold roughly 42% of the world's estimated 930 billion short tons of recoverable coal reserves. For Houston-based Synthesis Energy Systems (SES), they are key markets for building demand for coal-based fuels and chemical products.

China and the United States hold roughly 42% of the world's estimated 930 billion short tons of recoverable coal reserves.

"Today I see coal gasification as a tremendous growth opportunity due to gasification's ability to convert coal to clean synthesis gas that can then be used to produce a variety of energy and chemical products," said SES President and CEO Robert Rigdon. "The technology has matured quickly over the last 10 years."

Coal Gasification

Rigdon, a mechanical engineer who gained expertise in gasification for more than two decades with Texaco (and later ChevronTexaco) as well as GE Energy, pointed out that coal gasification serves as the only fully commercially available technology for converting coal to fuel and chemical products. The process entails a series of high-temperature chemical reactions, which convert coal into synthesis gas (syngas) that primarily consists of carbon monoxide, hydrogen, and methane. Impurities are then removed from the syngas, which can be combusted to generate electricity. Alternatively, the clean syngas can be processed into fuel and chemical products such as diesel, gasoline, substitute natural gas, hydrogen, methanol, ammonia, and other chemicals.

Many energy companies are facing the prospect of reducing their carbon dioxide (CO2) emissions as various governmental bodies contemplate or implement emissions trading programs. According to Rigdon, coal gasification offers a built-in advantage in terms of CO2 capture. "At the stage where the syngas impurities are removed, the CO2 is also removed," he said. "This is an inherent feature and advantage of the technology and is important because the CO2 can then be stored through enhanced oil recovery (EOR), in products, or within deep geological formations."

Low-Rank But Not Low-Value

Cost has long been an obstacle to the growth of coal gasification for applications outside of electric power generation or steel manufacturing; cheap, low-rank coal that contains relatively high levels of ash, sulfur, and water is simply combusted in either case. Gasification plants, meanwhile, generally have not had the capability to efficiently convert low-rank coal such as lignite into more valuable products. Moreover, the owners of these facilities could not justify the economics of using the more expensive, higher-rank coal feedstocks that were compatible with their equipment.

Gasification plants generally have not had the capability to efficiently convert low-rank coal such as lignite into more valuable products.

The gasification technology that SES uses is designed to gasify a wide range of low-grade, high-ash coals. The company believes that having this capability gives it an advantage over other gasification technologies by improving the economics of gasification for fuel and chemical production. The fluidized bed "U-GAS" gasification technology, developed by and licensed from the Des Plaines, Ill.-based Gas Technology Institute, can gasify the following difficult coals: lignite, sub-bituminous, high ash bituminous, and coal wastes.

Having the technology to process these grades of coal dramatically increases the supply base for gasification. "In the U.S. and China, more than 40% of the known coal resources fall into these categories," said Rigdon. "Our goal and strategy for the U.S. and China markets will be unlocking the value in the more challenging coal fuels. These coals are much cheaper than higher-grade coal, thereby allowing us to be a low-cost producer relative to other coal gasification technologies."

types of coal

Competitor or Collaborator?

According to Rigdon, liquid products derived from coal can use existing oil and gas transportation and storage infrastructure without modification. In fact, he noted they are "much cleaner" than conventional oil-based products such as ultra-low sulfur diesel, jet fuel, and gasoline. "I believe there could be some segregation of these products to take advantage of the very clean nature of the coal-based versions," he said. "Gaseous products such as hydrogen or substitute natural gas would also use the existing infrastructure."

Although he touts the benefits of the improved coal gasification technology SES uses, Rigdon believes that ample opportunities exist for his company to collaborate with natural gas producers, oil refiners, and petrochemical plants. "I really do not see SES as a direct competitor to oil and gas companies," he said. "In fact, I see just the opposite."

"I really do not see SES as a direct competitor to oil and gas companies. In fact, I see just the opposite."

Rigdon pointed out that gas companies are "naturally interested" in the U-GAS technology because it allows coal to be converted to methane gas. "With our technology combined with a process known as methanation, a gas company can view a coal reserve as gas equivalent reserves," he said. "For this reason, we believe there is alignment for collaboration." SES also sees partnering opportunities with oil companies, which are increasingly becoming integrated energy companies with portfolios of energy sources beyond oil. "There are other drivers that also interest oil companies such as integrated gasification plants with refineries for production of steam, power, and hydrogen," he added. "Hydrogen is highly valued by refineries for hydrogenation of fuels to make them cleaner-burning."

Growth Areas

China has proven to be a growth market for coal gasification plants, and Rigdon believes many of the recent advances in gasification technology stem from China's eagerness to deploy such facilities. "China is the world leader in building coal gasification projects," he said. "I see gasification as having the best opportunities in regions in Asia such as China, where there is a strategic plan for growth in coal-based energy and where projects can be built at reasonable capital costs." SES completed its first project, a syngas production plant in China's Shandong province, in January 2008. Also, the company is partnering with a local Chinese company to build a syngas-to-methanol plant in Henan province. In addition, SES is developing coal gasification plants in regions rich in lignite coal such as Inner Mongolia.

Rigdon anticipates greater adoption of his company's technology in China over the next decade, and SES' goal is to have a more extensive China-based operation. "I believe a likely scenario is where gasification growth in China continues and China has adopted and enforced more stringent pollution control measures that further fuel the installation of coal gasification facilities," he said. "I expect China will be a growing user of DME (dimethyl ether) as a substitute for LPG (liquefied petroleum gas) and diesel fuel as well as expanding blending of methanol into the gasoline supply."

According to Rigdon, another coal-rich Asian country - India - is prime territory for future SES projects. The company has not announced any definitive plans for facilities in that country, however.

Rigdon is somewhat less optimistic about near-term opportunities in the U.S., which is often dubbed the "Saudi Arabia" of coal. "In regions such as the U.S., the challenge continues to be a heavy reliance on volatile and cheap imported oil and gas which inhibits growth of alternative clean technologies such as coal gasification," he said. "In addition, the growing concerns over greenhouse gas emissions are slowing development of all types of coal-based energy projects in the U.S. due to the uncertainty around future CO2 regulations."

In the longer-term, however, Rigdon believes the U.S. market will become more receptive to coal gasification out of necessity as well as the ongoing push to limit greenhouse gas emissions."The U.S. economy is a huge energy consumer and, although we are in the midst of a global recession, I expect the U.S. economy to rebound and grow over the next 10 years, fueling a large demand for energy," he predicted, adding that no single technology - and certainly no single renewable technology - can meet this demand.

"Coal is a huge U.S. resource and will need to be part of the U.S. energy landscape," Rigdon concluded. "In this time frame, I do believe the U.S. will adopt some form of regulation for carbon capture and storage of greenhouse gases like CO2. I expect this would jump-start the U.S. coal gasification business for power and fuels."

Matthew V. Veazey has written about the oil and gas industry since 2000. Email Matthew at mveazey@rigzone.com

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