In this edition of IN FOCUS we would like to provide our readers with a situation update of the use of bio-ethers in the various regional gasoline markets around the world, together with an outlook of where we see potential future opportunities and challenges for ETBE and bio-MTBE.
Bio-ethers have been a sustainable factor in the gasoline pool in the European Union and in Japan for years, initially only as ETBE but as of late also bio-MTBE is being used in European gasoline.
ETBE was first commercially used in Europe in 2002, after the European Union introduced its initial biofuel directive which provided a sizeable, financial advantage to those (refiners/blenders/retailers) who employed bio-components in their retail fuel mixes. Ether producers who were able to convert their MTBE units to ETBE, meaning replacing conventional Methanol feeds into their units by feeding bio-Ethanol instead, responded to opportunities provided by the new directive.
ETBE quickly turned into an important, sustainable component in the market, supporting the European biofuel directive while helping producers to maintain their ether production and gasoline retailers to accomplish their bio-targets. ETBE enabled refiners and blenders to exploit the financial incentives granted by potentially avoiding a rather costly investment into a blending infrastructure conversion from a “wet” system into a “dry” system, which were required in most cases in order to accomplish on-spec production of gasoline containing bio-Ethanol by direct blending. The ETBE market in the European Union grew to an on average 3.0m MT/y over the next few years, being seen as the best possible solution for all parties involved, biofuel-producers, ether producers and gasoline retailers.
However, annual demand volumes have retreated to an estimated 1.5m MT/y. between 2010 and 2015. ETBE has since maintained its market share as the product is still being used by refiners and gasoline blenders to achieve their annual biofuel quota, particularly in cases where technical restrictions with direct Ethanol blending prevented the retailer from complying with the targets.
ETBE in Japan has been utilized in gasoline since 2005 and is till today the only large-scale biofuel programme in the North East Asian country. The nationwide blending percentage is expected to achieve a 5% rate by 2020 and consumption of ETBE has been gradually increased over the recent years. The experience with ETBE in Japan is thoroughly positive, helping the oil industry to segregate domestic gasoline streams from export lines, without running the risk of any cross contamination. Beyond this, Japanese authorities in cooperation with the oil industry conducted an analysis and discovered that the cost to implementing appropriate storage and blending infrastructure for direct-Ethanol blending could amount to over USD 3 billion, which helped their decision to choose bio-ETBE.
Apart from European Union and Japan, ETBE has only been commercially introduced in Mexico during the 2009-2012 time frame. However, ETBE usage came to a complete halt in 2014 when Mexico switched back to the exclusive use of MTBE as the prevailing fuel ether.
In today’s gasoline fuel-mix in the European Union bio-ethers still play an important role, helping retailers, refiners and blenders to fulfil their biofuel blending obligation. Bio-ethers are being used in parallel with bio-Ethanol or as an alternative to bio-Ethanol direct blending. ETBE has been used first time in Europe in 2002 and over the last couple of years bio-MTBE emerged as a viable and attractive solution to the biofuel blending obligation challenge as well. Bio-Methanol supply in Europe became commercially available in 2011. Current bio-Methanol production is estimated at around 200,000 MT per year, limiting the theoretical bio-MTBE output to 550,000 MT at present. A range of additional projects in Germany, Poland, The Netherlands and Scandinavia, as well as in Canada have been announced or are under construction which could add another 1.0-1.5m MT/y of capacity.
In terms of CO2 emissions and sustainability, bio-ethers can only be as good as their feedstocks, bio-Ethanol, bio-Methanol and eventually bio-isobutene. This may vary according to the particular processes and initial feedstocks. Bio-Ethers can be made from food biomass (lower CO2 savings and poor sustainability) or from wastes/residues (higher CO2 savings and good sustainability).
The main advantage of bio-ethers over bio-Ethanol lies in the technical part of a gasoline blending operation. Bio-ethers are fully fungible within the gasoline system, while direct-Ethanol blending had issues, e.g. with regards to vapour pressure, water miscibility and/or phase separation. Furthermore, the RON/MON sensitivity of bio-ethers is smaller than for Ethanol which is an important characteristic for refiners and blenders. Also with respect to material compatibility in the gasoline infrastructure, bio-Ethers are advantageous and can be used where ethanol cannot be used or only with limitations.
The technical value of bio-MTBE and ETBE for a refiner and blender are almost identical. The marginal advantage ETBE has over bio-MTBE in terms of octane is compensated by the fractionally higher density of ETBE. While the CO2 footprint may differ, depending on feedstock and process, gasoline retailers will fulfil their biofuel obligations in the most cost effective manner and make their choice accordingly.
Challenges for bio-ethers
As mentioned above, the technical value (blend value) for both, bio-MTBE and ETBE are about identical, and as such they are matching the value of conventional MTBE. Production cost for both products on the other hand is significantly higher, due to the higher feed cost of bio-Methanol and bio-Ethanol.
In the case of bio-Methanol, the actual production cost difference various greatly with different process technologies and local conditions. In today’s market and based on existing production and technology, we estimate the incremental cost to produce bio-Methanol is near a 1.5-2.0 factor versus conventional Methanol.
In the case of ETBE the extra production cost results from the price difference between Ethanol in ETBE and Methanol in MTBE, adjusted by the different composition and production yields of MTBE and ETBE.
Against this stands the premium value/premium price a producer can achieve when supplying product to a gasoline retailer. The incremental value for the retailer depends on the given biofuel directive in the country where the product is blended and sold. In most cases, the bio-products enjoy a different excise duty status, while the value for the retailer also depends on where he stands against his biofuel obligation. Premium prices for bio-MTBE and ETBE are negotiated between buyers and sellers in individual negotiations.
The biggest difference between bio-MTBE and ETBE today is that bio-MTBE enjoys the “double-counting” status, meaning that the bio-obligation credit for the product is applied on 100% of the volume of bio-MTBE used. In the case of ETBE, the bio-credit is applied on 47% of the volume, namely on the bio-Ethanol contents per unit of ETBE.
With reference to the above it becomes obvious that bio-ethers, like any biofuels in general, are workable options in gasoline when mandated or otherwise promoted. Financial incentives, in form of subsidies or penalties are required, to bridge the gap to conventional fuel solutions.
While the technical feasibility of bio-ethers is beyond most refiners’ doubts, it will prove difficult for bio-ethers to gain a foothold in other markets. However, one prominent exception is China where the central government introduced a biofuel policy in September 2017, seeking a 10% Ethanol blending ratio in gasoline. Since the announcement, the administration is facing numerous challenges to overcome, caused by limited, domestic Ethanol production and a very high import tariff, logistics challenges to supply the country nationwide, consumer resistance towards Ethanol gasoline as well as challenging questions on CO2 savings and environmental benefits.
China has till date been using conventional MTBE in a 7-8% concentration in its gasoline, reaching a total, domestic consumption of 10m MT in 2018 (approx.. 9.3m MT used in gasoline blending) and the country has a total ether capacity of approximately 18m MT/y. Introducing ETBE into the gasoline pool as a carrier for bio-Ethanol would allow the country to run bio and non-bio gasoline in parallel by gradually increasing the bio-product share. Cross-contamination issues which are likely to occur when operating bio and non-bio production lines could be avoided while the existing ether capacity in which China invested heavily in the last ten years will be fully utilized.
Bio-ethers are clean, sustainable products which can help to improve air quality tremendously. Bio-ethers keep existing fuel streams fully interchangeable and can be used in all internal combustion engine vehicles, unlike Ethanol blended alternatives which can cause issues in older models. In comparison with Ethanol blended fuels, bio-ethers reduce smog formation by producing fewer volatile organic compounds (VOCs), while also emitting around 38% less CO2 across their lifecycle. The European Union has recertified the existing bio-ethers facilities in Europe, underlining the fuel ethers suitability as a means of ensuring cleaner-running vehicle engines.
The use of bio-ethers comes at a cost but so does the use of any biofuels in transportation fuels. Bio-ethers need the same political support bio-Ethanol obtains to be competitive, potentially offering a superior, long-term solution to air quality problems than conventional biofuels do.