China’s use of fuel methanol and

implications on future energy trends

For
Washington Methanol Policy Forum
June 13, 2017 | Washington D.C.

By
Peter Gross, Natural Gas Markets Team,
U.S. Energy Information Administration

U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov

Overview
• China’s changing energy mix: economic growth, energy
security and cleaner fuels

• China’s methanol use for fuel, both in direct blending and as

derivatives

• Feedstocks for China’s methanol production

• Future outlook for China’s methanol and other alternative fuel

uses

• Implementation of Argus data into EIA’s historical and

projected petroleum data

Peter Gross, Washington Methanol Policy Forum,

June 13, 2017 2
Summary of Argus China Methanol to Energy
Study
• China’s methanol supply and demand have risen, through direct blending and as
derivatives (MTBE, MTG, DME). Recent drivers of methanol consumption growth
have been fuel applications and methanol conversions to olefins.

• Coal (directly or through coking gas) accounts for 85% of the feedstock for China’s
methanol production capacity, and natural gas makes up the remainder. China will
continue to use coal as the major feedstock in the future, but demand in the long
term could be met by higher methanol imports (natural gas-based).

• Chinese provincial governments are supporting methanol use by adopting standards

ranging from M5 to M100. Shanxi is the province with the most widespread use of
methanol. National standards exist for M85 and M100, and an M15 standard is
under review.

• Independent refiners have increased blending of higher octane components into the
gasoline stream in the past few years. Most of these components (methanol, mixed
aromatics, and others) are not taxed, and are cost competitive with gasoline.
Methanol is the least cost blending component and should remain competitive in the
longer term.

Peter Gross, Washington Methanol Policy Forum,

June 13, 2017 3
Argus study will improve EIA’s International
Energy Outlook
• China’s gasoline demand was assumed to come from only petroleum sources in
prior IEOs. Although, now we understand that a sizeable volume is likely sourced
from coal as a high-methanol blend.

• China’s gasoline demand in future IEOs will include methanol blends (under the
category of gasoline).

• Methanol will be considered as an alternate bunker fuel in future IEOs.

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June 13, 2017 4
China's primary energy consumption has been dominated by coal,
though government policies are currently reducing coal’s share
quadrillion Btu % of coal share

140 80%

120 70%
Coal
Oil 60%
100
Natural gas
Hydroelectricity 50%
80
Nuclear
40%
Other renewables
60 Coal share
30%
40
20%

20 10%

0 0%
2000 2002 2004 2006 2008 2010 2012 2014

Sources: EIA, BP Statistical Review

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June 13, 2017 5
EIA’s International Energy Outlook (IEO) 2016:
China energy consumption by energy source, 1990–2040
quadrillion Btu History 2015 Projections
100
Coal

80

60

Renewables
40
Petroleum and other liquid fuels

20
Natural gas

Nuclear
0
1990 2000 2010 2020 2030 2040

Source: EIA, International Energy Outlook 2016

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June 13, 2017 6
Gasoline and diesel serve more than half of China’s petroleum
consumption
China's Petroleum Consumption by Product, 2014

Refinery gas Others • Since 2014, gasoline, jet fuel,

3% 11%
liquefied petroleum gas (LPG),
Petroleum and naphtha have increased
coke substantially.
Asphalt 3%
3% • Gasoline and jet fuel use has
Diesel increased in the past 2 years as
Methanol 31% the economy transitions to a
4% more consumer-driven growth.
Jet fuel • LPG has grown in China’s
and petrochemical sector as new
kerosene Propane Dehydrogenation
4% Naphtha (PDH) plants are coming online.
8% Gasoline
20% • Shares of diesel and fuel oil
LPG
Residual fuel 8%
have declined as mining and
oil other industrial sectors slowed.
5%

Source: EIA

Peter Gross, Washington Methanol Policy Forum,

June 13, 2017 7
IEO2016: China transportation sector delivered energy
consumption by energy source, 2010–40
quadrillion Btu
30

Electricity
25 Natural gas
Other liquids
20 Jet fuel

15 Diesel

10

5 Motor gasoline

0
2010 2015 2020 2025 2030 2035 2040

Source: EIA, International Energy Outlook 2016

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June 13, 2017 8
 Global methanol production and consumption by region, 2014
Methanol Production by Region, 2014
Middle East South America
16% 11%
Other Asia • China accounted for more
7%
than half of the world’s
Russia/CIS
China methanol production and
5%
51% consumption in 2014.
North America
4% • China’s consumption
Africa Europe
exceeds production, and
3% 3%
they rely on imports from
Methanol Consumption by Region, 2014 almost all other regions.
Less-expensive
Other Europe production and new
Asia 11% methanol producing
13%
capacity in the United
North America
10% States could serve China
China
55% Middle East in the future.
4%
Russia/CIS
4%
South America
3%
Source: Argus Media group

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June 13, 2017 9
Uses of methanol in fuel

• Direct blending
– Blending standards vary by region
– Issues with high levels of blending

• Methyl Tertiary Butyl Ether (MTBE)

– Oxygenate booster for gasoline
– No longer used in the United States (but manufactured and exported)

• Dimethyl Ether (DME) as LPG alternative

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June 13, 2017 10
 China's methanol consumption in fuel products has been
increasing over the past decade

thousand barrels per day

600

Other uses of methanol in fuel (DME and industrial sector direct burn)
500
Methanol derivatives to gasoline (MTBE + MTG)

400 Direct methanol blending to gasoline

300

200

100

0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Argus Media group
Notes: DME = Dimethyl Ether; MTBE = Methyl Tertiary Butyl Ether; and MTG = methanol-to-gasoline

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June 13, 2017 11
China's methanol consumption is increasingly being driven by
fuel applications and methanol conversion to olefins
thousand metric tons

70,000

60,000
Chemical and Plastics Industries 2%

50,000 Fuel applications

MTO/CTO 36%

40,000 Other

30,000
35%
20,000

10,000
27%
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Argus Media group

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June 13, 2017 12
China's methanol capacity by feedstock
China’s Methanol Production Sources, 2015

Coking • Most of China’s methanol production

gas stems from coal as a source. About
17% two-thirds of China’s methanol
Coal Natural production is from direct coal supplies.
68% gas • Coking gas is a by-product of steel
15%
production, which uses coal as a direct
fuel source.
• Natural gas accounts for about 15% of
China Methanol Capacity by Feedstock methanol production.
thousand barrels per day
3,500 • China is likely to rely on coal as a
3,000
Theoretical Capacity Additions feedstock for the near future because
2,500
Coking Gas of its cost competitiveness. However,
2,000
Coal any tightening of environmental
1,500
Natural Gas regulations or changes in China’s
energy policies could alter coal’s share
1,000
in China’s methanol production.
500
0
2000 2005 2010 2015 2020 2025 2030 2035 2040

Source: Argus Media group

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June 13, 2017 13
 Global MTBE consumption by region in 2015
MTBE Consumption by Region, 2015
• China was, by a wide margin,
the world’s top MTBE
Others consumer in 2015.
21%
• China’s higher gasoline
specifications (resulting in
Taiwan lower sulfur content) require
2% China
37% gasoline to be blended with
Malaysia higher oxygenates such as
2%
MTBE.
Netherlands
4% • China also has the world’s
South Korea highest MTBE production
4% Saudi capacity.
Arabia
Singapore 10% • The U.S. has long since
4%
Russia
abandoned MTBE as a fuel
Mexico Venezuela
5% 5% 6%
oxygenate for health and
environmental reasons.
Source: Argus Media group

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June 13, 2017 14
China’s methanol blending by province

• China has methanol blending standards in 14 provinces.

• National standards for M85 and M100 exist and a standard for
M15 blending has been proposed.

Sources: Argus Media group and Methanol Institute

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June 13, 2017 15
U.S. methanol production is growing to serve some of China’s
import needs; China is investing in new U.S. methanol plants

Methanol Company Output Location Status Startup

Project capacity year
(million
ton/year)

St. James Yuhuang 1.7 St. James Under 2018

project Chemical Parish, LA construction
Phase 1

Port of Northwest 3.6 Kalama, WA Planning and TBD

Kalama Innovation permitting stage
project Works joint
venture (BP and
Chinese
Academy of
Sciences)

Source: Oil and Gas Journal, Seattle Times, The News Tribune, Sightline Institute

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June 13, 2017 16
For more information
U.S. Energy Information Administration home page | www.eia.gov

Short-Term Energy Outlook | www.eia.gov/steo

Annual Energy Outlook | www.eia.gov/aeo

International Energy Outlook | www.eia.gov/ieo

Monthly Energy Review | www.eia.gov/mer

Today in Energy | www.eia.gov/todayinenergy

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