China Leads the World in Methanol Fuel Blending

By Gregory Dolan

Vice President for Communications and Policy

Methanol Institute

Arlington, VA

In 2007, China firmly established itself as the driver of the global methanol industry.  The country became the world's largest methanol producer and consumer.  China also leads the world in the use of methanol as an alternative transportation fuel, blending nearly one billion gallons of methanol in gasoline last year.  Taxi and bus fleets are running on high methanol blends (M-85 to M-100) [Pictured, taxi refueling with M-100], and retail pumps sell low level blends (M-15 or less) in many parts of the country.  At the same time, China is developing production capacity for dimethyl ether (DME) - using coal-based methanol as a feedstock - for markets as a blendstock with liquid petroleum gas (LPG) used for home hearing and cooking and a as diesel substitute for buses.

            China's methanol production capacity has grown from 6.16 million tons in 2003 to more than 20 million tons in 2008.  By 2010, China's methanol production capacity could reach 37 million tons.  To put this in perspective, total world production capacity excluding China is expected to be roughly 40 million tons this year (about 13.3 billion gallons or 50 billion liters).  Most methanol is used as a feedstock for producing chemicals like formaldehyde and acetic acid, as well as fuels and fuel additives such as biodiesel, MTBE and TAME.  Research and Markets, an international research firm, reports that demands for methanol fuel as M-15 and other downstream products will increase China's consumption of methanol at an annual average growth rate of 16.6% between 2008 and 2012, which will help sustain high methanol prices in the country.

For more than a decade, provincial leaders in coal-producing provinces (Xinjian, Shanxi, Shaanxi, Henan, Inner Mongolia, Beijing Shi, Hebei, Anhui, Guangdong and Sichuan) have been developing methanol fuel demonstration programs.  These efforts have involved methanol producers, automakers, and academic institutions.  In September 2006, eight leaders provided a report to the Chinese President Hu Jintao titled "Suggestion on Promoting Methanol Fuels to Replace Gasoline and Diesel Fuel."  President Hu approved this "Suggestion" and directed the powerful National Development and Reform Commission (NDRC) to explore the use of methanol fuels.  The NDRC now considers coal-based methanol to be a strategic transportation fuel, and has directed the development of national methanol fuel blending standards.

Those provinces in the "official" trial stage have already adopted their own methanol fuel specification to allow the demonstration of methanol vehicles.  Today, methanol pricing has remained below that of wholesale gasoline, encouraging the "unofficial" use of low level methanol fuel blends even in parts of the country that do not have a methanol fuel specification.  Methanol demand for transportation fuel blending in China has reached roughly 3 million metric tons or one billion gallons.

"In the U.S., corn ethanol may be king, but in China where pure economics matter most, methanol is the dominant alternative fuel," said Methanol Institute President & CEO John Lynn.  "With millions of miles of experience in using methanol in cars, trucks and buses, China is showing the rest of the world how clean transportation fuels can be made from coal."

China has over 140 methanol plants, and many of these are smaller plants that are closing as larger, world-scale facilities are built.  While demand for tradition methanol markets (formaldehyde, acetic acid, MTBE) are increasing at double-digit rates, the tremendous growth in new capacity will make available large volumes of methanol for fuel markets.  If just 5% of China's cars used M-85 or M-100 fuel and another 15% use M-15, China would displace 13 million tons of gasoline (4 billion gallons) and significantly reduce its dependence on imported oil.

            In 2007, China's imported 47% of its oil, and in 2008 the country passed Japan to become the world's second largest oil importing nation only behind the United States.  As Prof. Ni Weidou of the Tsinghua University-BP Clean Energy Research and Education Center told Interfax-China, "The clock is ticking, and China needs to start adopting alternative fuels now in order to lessen its dependency."  China has banned the use of grain for ethanol production to ensure food supplies.  Also known as wood alcohol, methanol is the simplest alcohol fuel (CH3OH), while ethanol -- commonly known as grain alcohol - has a more complex structure with a carbon-to-carbon bond (C2H5OH).  Methanol can be made from a broader range of feedstocks including natural gas, coal, and any organic material.  On a global basis, most methanol is made from natural gas, in plants that have significantly improved energy efficiency and reducing carbon dioxide emissions by up to 40%.  Some facilities report emissions as low as 0.54 tonnes of CO2 per tonne of methanol produced, or 3.8 pounds of CO2 per gallon of methanol.  On a well-to-wheel basis, methanol from natural gas used as a vehicle fuel has roughly the same greenhouse gas emissions as a gasoline-fueled car.  When produced from coal, methanol will have higher greenhouse gas emissions, and near zero CO2 emissions when produced from renewable biomass.

            China does have the world's third largest coal reserves - 126 billion short tons - behind the United States and Russia.  China is now the world's largest coal producer and consumer, and has begun a strategic shift to produce chemicals and fuels from coal rather than oil or natural gas.  The production of methanol from coal gasification is a mature technology. 

            In the United States, Eastman Chemical produces methanol from coal gasification at a plant in Kingsport, Tennessee that was built with support from the U.S. Department of Energy.  Based on this experience, the U.S. DOE estimates that methanol can be produced from coal for as little as 50¢ per gallon.  In addition, coke furnaces in China generate 80 billion cubic meters of waste gas each year, enough to produce 40 million metric tons of methanol, and significantly reduce pollution in the coal-producing regions.  Coal-bed methane deposits of 30,000-35,000 billion cubic meters in China represent another significant energy resource as well as a hidden danger that claims miner's lives each year.  Just 1000 cubic meters of coal-bed methanol can produce one metric ton of methanol.

            China's automotive industry is already stepping up to meet this challenge.  The country's fastest growing independent automaker, Chery Automobile, has competed demonstration work on 20 methanol flexible-fuel vehicles - capable of operating on methanol or gasoline - now ready for full-scale production.  Shanghai Maple Automobile has announced plans to build 2,000 methanol cars.  Chang'an has introduced the methanol-fueled BenBen car.  Greely Automotive has put its Haifeng methanol car into production.  Shanghai-based Huapa Automotive has built a number of methanol fueled cars.  Shanghai Automotive Industry Corporation, one of the big 3 automakers in China, is developing a number of methanol-fueled cars.  In addition, a number of smaller companies are converting large numbers of cars to methanol operation.

            China considers coal-based methanol to be a strategic transportation fuel, and the National Development and Reform Commission has directed the development of national methanol fuel blending standards to guide the growth of the market for methanol fuels.  The methanol standard work is part of China's 863 alternative energy initiative.  In March 2007, China's Committee on Standardization requested three methanol standards, as follows:

●  High Proportion - Based on the ASTM D-5797, this is a M-70 to M-85 standard. 

●  Low Proportion - M-5 to M-15 standard which would also would include appropriate additives/co-solvents. 

●  Convertible Methanol Fuel - This is an M-100 standard that would set the specifications for neat methanol to be used as a gasoline blendstock at the M-15 level. 

These standards are expected to be fully adopted before the end of this year, and will move China from the demonstration of methanol fueled vehicles to large-scale commercial deployment.  Mr. Rong Junfeng, a senior official with China Petroleum and Chemical Corporation has stated, "The standards will surely facilitate supervision over the current methanol market, and will define the way of methanol development in the future."   In terms of fueling infrastructure, as liquids methanol and ethanol are the least cost alternatives when compared with gaseous fuels such as compressed natural gas and hydrogen.

            The Methanol Institute serves as the trade association for the global methanol industry.

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