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Ethanol Can Come from Natural Gas Without Subsidies

Making ethanol from newly abundant natural gas instead of corn would avoid taking food off the world's table and would create another market for growing gas supplies coming from U.S. and other shale basins. Dallas-based Celanese Corp. last year announced a technology to do just that.

"Celanese ethanol production is not based on fermentation of carbohydrates and sugars," CEO David Weidman told financial analysts during a conference call last December. "Our process is an innovative new thermochemical process utilizing basic hydrocarbons such as coal, natural gas, pet coke or whatever hydrocarbon is readily available and most economically advantageous in each region or country."

The company's process is called TCX, and its feedstock flexibility allows the use of the most locally abundant hydrocarbons, decreasing dependence on imported raw materials, Celanese said. The technology produces ethanol for multiple applications, such as in the manufacture of paints, coatings, inks, antiseptics, pharmaceuticals and fuels.

Celanese just broke ground on a technology development unit in the Houston suburb of Clear Lake which is expected to be operational by the middle of next year. Celanese also is accelerating plans to produce ethanol in China at new facilities. The current demand for industrial ethanol in China is about three million tons annually and is expected to grow 8-10% per year, "leaving a large gap" between demand and local supply, Celanese said.

Weidman said the economics of the Celanese process "compare very, very favorably to fermentation at virtually any point in an economic cycle -- high or low corn prices, high coal or natural gas prices as compared to corn."

CFO Steven Sterin said the company has three criteria it looks for in potential markets: a desire to reduce dependence on imported energy; access to hydrocarbons at attractive prices; and "from an economic standpoint, where there is a level playing field and governments aren't selecting winners and losers."

The U.S. Senate on Tuesday declined to kill the $5 billion annual subsidy to corn-based ethanol; however, the matter is expected to come up again as lawmakers focus on spending cuts. But as for Celanese, it says it doesn't need subsidies to compete, assuming there is a level playing field.

"Our technology competes without subsidies, and so we're looking for opportunities to be able to go in and compete on a fair basis, and we think we could be advantaged in those markets," Sterin said.

He highlighted China as being particularly attractive for offering growth with a level playing field. "Markets like the U.S. are more challenging," he said. "We will continue to pursue the U.S. market, but we could compete with corn on a level playing field and be very advantaged.

"...In the U.S. the issue is not necessarily subsidies. There's all sorts of standards around renewable fuels and other legislation that creates an artificial market dynamic in the U.S. But on an economic basis, our technology is advantaged to any other alternatives that would be out there today."

Asked what U.S. gas prices are needed to make the Celanese process economic for ethanol production, a spokesman declined to comment. "It's more than just natural gas prices that makes this process economical for Celanese," he said.

During the conference call Weidman emphasized that Celanese is focusing on industrial markets for ethanol. "...[T]here are no artificial economics," he said. "It is grounded fundamental economics. We can compete successfully there and do very, very well."

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