Calgary’s Nauticol on track to becoming first to produce net-zero methanol

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CALGARY — When the COVID-19 pandemic hit, methanol plant proponent Nauticol Energy went back to the drawing board to redesign its $2-billion petrochemical project in northwestern Alberta, to align itself to the province’s new focus on reducing its carbon intensity.

“There just had to be a change in plant design and the execution strategy and a big move to net-zero,” said Nauticol president and CEO Mark Tonner, adding that the company retained engineering teams in the middle of the coronavirus lockdown with the goal of designing a greener project.

As a growing number of Alberta companies announce net-zero emissions goals and governments make increasingly stringent emissions goals, Tonner said the company wanted to get in front of the trend with its own carbon-cutting initiatives.

Calgary-based Nauticol now plans to use renewable electricity to power its plant near Grande Prairie, Alta. and outfit the facility with a carbon-capture and storage component that will allow the company to use natural gas to produce methanol without emissions. Nauticol announced March 23 a partnership with carbon capture firm Enhance Energy to sequester 1 million tonnes of carbon dioxide from the facility per year.

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“It makes Nauticol the first company to produce net-zero or blue methanol on a world scale,” Tonner said, adding the new design will add “some costs” to the project, which the company has also scaled up from a proposed three-million-tonne-per-year methanol project to a 3.4-mtpa facility.

Tonner said the project would take perhaps up to three-and-a-half years to build and the company hopes to be operational by 2025, which means the company is likely hoping to break ground next year.

Nauticol’s methanol plant would take one of the lowest value products in natural gas — methane — and turn it into methanol, which is used as transportation and heating fuel in Asia, but can also be used to make products such as adhesives, formaldehyde and anti-freeze.

The project’s redesign aligns closely with a number of objectives the Alberta provincial government is trying to achieve, including the deployment of more carbon sequestration technology and the growth of value-added petrochemical manufacturing industry that uses the oil and gas produced in the province to create products.

Alberta’s current United Conservative government and the previous NDP government both prioritized supporting the growth of petrochemical industries in the province, because construction of the multi-billion facilities creates new jobs in the province and facilities also create a natural hedge against commodity price fluctuations.

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In a recent speech to the Canadian Association of Oilwell Drilling Contractors, Alberta Premier Jason Kenney touted the potential for petrochemical investment as a source and said a $3-billion investment in the sector is close to being finalized. Officials in the Premier’s office did not clarify which project the premier was referring to.

While energy executives and politicians in Alberta tout the potential of the province for petrochemical investment, there is currently only one project under construction and others are paused.

Right now, work is underway on Inter Pipeline Ltd.’s $4 billion Heartland petrochemical complex near Edmonton, which would turn propane into plastic and on April 5, the Alberta government provided the facility with $408 million in grants under a diversification program, representing just over 10 per cent of the project’s cost.

A similar $5-billion project from competitor Pembina Pipeline Corp. is on pause. Alberta is home to roughly 44 per cent of Canada’s petrochemical plants, followed by roughly 31 per cent in Ontario and 19 per cent in Quebec, according to Industry Canada data.

While there is currently just one project under construction, some in the industry believe that Alberta can attract tens-of-billions of dollars in additional investment to the province.

Mark Plamondon, executive director of the Alberta Industrial Heartland, an economic development area home to existing petrochemical facilities, has said his organization’s goal is to attract $30 billion in new projects by 2030 — though he admits that timeline may be pushed back by a few years as a result of a decline in investment following the COVID-19 pandemic.

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“Our studies indicate that Alberta’s Industrial Heartland is the best place to put a facility without incentives,” Plamondon said, adding that the incentives available from the provincial government further improve the economics of building projects in the region, which is immediately north of Edmonton.

Plamondon said that natural gas, which petrochemical facilities use as feedstock, is cheap and abundant in Alberta, which creates a major advantage for the province as it tries to attract more petrochemicals investment. He also said the province’s geology allows potential petrochemical companies to create underground storage caverns for their facilities, which is another inherent advantage.

But in the 15 years before Inter Pipeline began construction on their Heartland petrochemical project, Alberta was unable to attract any “substantive investment,” said Bob Masterson, president and CEO of the Chemistry Industry Association of Canada.

Some of the challenges the industry faces are focused on federal policy, Masterson said, adding that Ottawa’s move to label plastic products as “toxic” could scare off potential investment in the sector.

At Nauticol, Tonner said he believes a major advantage to building in Alberta is the supply of low-cost natural gas. Nauticol’s plan is to take the cheapest component of the natural gas stream — methane — and upgrade it into higher value methanol.

“We take the lowest value gas that’s in the feedstock. We take it and we turn it into a liquid,” Tonner said.

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There are also advantages to being able to ship that methanol by train and boat to Asia off the West Coast, rather than sending the products through the Panama Canal, which is what competing projects are doing on the U.S. Gulf Coast.

There are some additional costs to building out the methanol plant with a carbon capture and storage facility attached to it, Tonner said, adding the project would still be economic and the facility’s per-unit costs would be roughly the same as the company’s initial plant design.

The company plans to use PCL Construction in Edmonton to build out the modules for the facility and construct the project on land recently purchased near Grande Prairie.

If built, it will be just the second petrochemical complex built in the province in the past 20 years.

“If we’re able to pull the key components together in the timeline that we think we can, the project could be operational by 2025,” Tonner said. “It’s an aggressive objective but we see momentum building.”

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