Can methanol decarbonize fuels?

Start-ups often dream big, but few are as ambitious as HIF Global. The company has massive low-carbon methanol projects in the works in Chile, Uruguay, Brazil, the US, and Tasmania.

The cost of building all these plants would be astronomical. On its project in Matagorda, Texas, alone, HIF wants to invest $6 billion to produce 1.4 million metric tons (t) of methanol per year. Worldwide, the firm plans to ultimately have 15 million t of methanol capacity.

HIF’s aims are sweeping. The Matagorda project could include direct air capture, a technology only beginning to be proved, to obtain the carbon dioxide it will turn into methanol. A dedicated solar farm and green energy from the grid would power water electrolysis units for the required hydrogen. HIF even intends to further process the methanol into low-carbon gasoline and other fuels.

“It is a really exciting time,” says Lee Beck, senior vice president of policy and strategy at HIF. “It’s really, really important that we get some facilities off the ground so we can essentially accelerate learning by doing.”

So far, HIF has a pilot plant in Chile, powered by its own wind turbine, that has shipped 100,000 L of methanol-derived gasoline to the Volkswagen subsidiary Porsche since going on line in 2022. The company has raised $480 million from backers including Porsche, the oil field services firm Baker Hughes, the Japanese oil company Idemitsu Kosan, and the Japanese shipping company Mitsui OSK Lines.

These investors view low-carbon methanol as a potential raw material for environmentally friendlier chemicals and fuels. Shipping companies in particular are evaluating it—along with options like ammonia and liquefied natural gas—as an alternative to the heavy fuel oil they have long used. Low-carbon, renewable methanol might even help rejuvenate petrochemical production in Europe.

But the firms backing low-carbon methanol will have to pull off the trick of meeting potentially high demand with economical production. While many blueprints for plants have landed on conference-room tables, very little capacity has actually been built.

“To be frank, in terms of the sort of genuine renewable methanol, I would say at the moment that it’s a concept rather than a reality,” says Mike Nash, vice president of syngas chemicals at the market research firm Chemical Market Analytics by OPIS (CMA).

Methanol has many attributes that make it an attractive candidate for decarbonizing chemicals and fuels. The single-carbon alcohol is versatile. It has been used for years in the synthesis of commodity chemicals such as acetic acid and formaldehyde; in recent times it has become an alternative to steam-cracked hydrocarbons to make olefins, particularly in China. It can be a building block for long-chain hydrocarbons like gasoline, and it has been used as a fuel outright. Indy cars burned methanol for decades until they were switched to ethanol in 2007.

“When you produce low-carbon-intensity methanol molecules, there are so many different outlets,” says Maurits van Tol, CEO of Johnson Matthey’s catalyst technologies unit, which provides the methanol production technology licenses and catalysts for HIF’s and other big projects. “We believe methanol will be a fantastic molecule in this sense to decarbonize shipping, but also so much more.”

Several routes to methanol offer substantial reductions in greenhouse gas emissions. Throughout most of the world, methanol is currently made from natural gas, which is mostly methane—a potent greenhouse gas. The methane goes through a reforming step to yield synthesis gas, a mixture of hydrogen and carbon monoxide, and the syngas is recombined to make methanol.

Instead of using natural gas, methanol makers can source methane from facilities that capture it from landfills or manure. Methanol firms such as OCI Global already supply limited quantities of methanol via this biomethane route. The approach could have enormous environmental benefits because it avoids methane emissions.

According to the Methanol Institute, a trade association, the carbon dioxide emissions of biomethane-based methanol fuels can be negative: –103 to 38 g CO₂e/MJ, versus about 103 to 110 g CO₂e/MJ for conventional methanol.

Another route to methanol produces the syngas by gasifying solid waste like forestry residues or municipal waste. Some limited capacity is already operating. For instance, Enerkem ran a demonstration plant in Canada that produced methanol from nonrecyclable waste. Emissions can be as low as 10–20 g CO₂e/MJ in the case of woody biomass.

The e-methanol route—which HIF intends to practice—is a complete departure from conventional methanol production and has the appeal of transforming renewable energy into a liquid fuel. In this approach, methanol is made by combining hydrogen produced via water electrolysis with CO₂ from industrial processes, biogenic sources, or even the air. Emissions can be well below 10 g CO₂e/MJ.

The first industrial-scale facility to use this technology is Carbon Recycling International’s plant in Iceland. Completed in 2012, it is capable of making 4,000 t of methanol per year.

Methanol producers can also reduce carbon dioxide emissions from methanol synthesis by capturing CO₂ from their flue gases and either storing it or using it to make more methanol. When doing the latter, producers will use a low-carbon source of hydrogen, such as renewable energy-powered electrolysis. Companies often refer to methanol made with carbon capture as blue methanol.

“Carbon capture technology holds the greatest near-term potential to materially reduce emissions from the production of methanol,” says Renato Monteiro, vice president of low-carbon methanol supply at Methanex, the world’s largest methanol producer. Such a setup can reduce the emissions generated on-site by 85%.

The biggest customers for low-carbon methanol in the near term will likely be shipowners, which aim to replace heavy fuel oil with lower-emission alternatives to meet upcoming regulations. The International Maritime Organization, which oversees global shipping, has a goal of reducing CO₂ emissions 20% by 2030 and 70% by 2040 from a 2008 base. It wants shipping to reach net-zero emissions by 2050.

According to Methanex, about 50 ships worldwide already have engines that can switch between methanol and traditional fuels. The firm expects more than 250 dual-fuel ships to be in service by the end of the decade.

Nash at CMA says that some 20 million t of methanol per year will be consumed as ship fuel by 2050. By then, overall methanol demand will be about 170 million t per year, up from 95 million t today.

Conventional methanol made from natural gas may not meet shipping regulations: though it generates less CO₂ per metric ton burned than fuel oil, its lower energy density means greater volumes are required for equivalent power output. “There is not a lot of point in sailing the vessels on methanol that isn’t produced in environmentally friendly ways,” says Paul Herbert, principal technical specialist at the shipping advisory firm Lloyd’s Register.

But should low-carbon methanol become widely available, experts see advantages over another emerging fuel that shipowners are considering: low-carbon ammonia.

Methanol is a liquid at room temperature, while other alternative fuels require cryogenics, notes Paul Hexter, president of Waterfront Shipping, which operates a fleet of dual-fuel vessels that Methanex uses to transport methanol. “This makes methanol easy to transport, store, and bunker using standard safety procedures that are similar to the well-established procedures for conventional fuels,” Hexter says.

Methanol is far less toxic than ammonia, which represents a particularly dangerous exposure hazard, says Herbert at Lloyd’s. “If you have passengers on board, for example, it’s going to produce some intolerable risks.”

And while methanol-powered ships have been at sea a long time, ammonia- powered ship engines are still under development. Herbert says he is not aware of a Lloyd’s Register–certified ship that has an ammonia-powered engine.

Over the long run, however, adoption of low-carbon methanol will depend on its commercial availability. If shippers aren’t confident they can source the fuel they need, they might seek other options. Recent difficulties sourcing the methanol have led some to consider liquefied natural gas instead, Herbert says. “The production of green methanol needs to be increased drastically.”

On paper at least, a deluge of low- carbon methanol projects will fill the void. Some 200 plants are in the planning stages, CMA’s Nash says, though only a handful have been given the final go-ahead.

A key question is cost. Low-carbon methanol will doubtless be more expensive to produce than conventional methanol, but exactly how much more is not yet clear.

Methanex published estimates—some of them quite wide—in its most recent sustainability report, based on its own calculations and those from the International Renewable Energy Agency. Conventional methanol costs $350–$450 per metric ton to produce; blue methanol costs $400–$550. Biobased methanol, whether it originates from biogas or gasified biomass feedstocks, costs $455–$1,013. Using the e-methanol route can cost $820–$1,620 per metric ton if it’s based on biogenic CO₂ and up to $2,380 if the carbon dioxide source is direct air capture.

“There’s a huge amount of interest in low-carbon methanol in all its different colors and forms. There are a lot more questions than we have answers at this stage,” Nash says. “And I think what the industry needs, really, is a few of these units to start up and get proof of concept that they can work.”

HIF’s Beck says methanol producers have to bear the risk and start building. “The most important near-term action is to have first-of-a-kind facilities at scale, facilities that are in the range of hundreds of thousands of tons per year, to start this cost-reduction journey.”

Beck acknowledges the need to build cost-effective capacity. “What we are doing with these projects is trying to—specifically in the planning and development phase—optimize for cost and quality of the product as much as possible,” she says.

The issue of affordability brings up a chicken-and-egg dilemma: companies won’t proceed with low-carbon methanol projects if they aren’t assured that shipping companies and other methanol customers will buy their product, and customers won’t switch to methanol unless they’re confident of a sufficient and affordable supply.

Even blue methanol, which Methanex says is the cheapest low-carbon option, faces cost questions. The firm is studying capturing CO₂ from flue gas at its methanol plant in Medicine Hat, Alberta, and using it to make additional methanol. The company is also exploring this approach at its Geismar, Louisiana, site.

“Despite technical feasibility, project economics require a price premium for blue methanol,” Monteiro says.

The shipping company Maersk formed the low-carbon methanol company C2X in 2021 to break the impasse between prospective producers and suppliers by investing in low-carbon methanol projects itself.

“They were looking at what is the fuel that they could use to help decarbonize ocean transport for Maersk, and they said green methanol through dual-fuel vessels was a pathway,” says C2X CEO Brian Davis. “Because at the time there was no green methanol, they basically said we have to try and do something to catalyze the supply.”

In 2023, C2X spun out of Maersk and is now majority owned by Maersk’s parent, the Danish conglomerate A.P. Moller Holding. Maersk retains a 20% stake.

One rationale for the spinoff was that C2X could do more than just supply Maersk’s ships with methanol, Davis says. C2X plans to supply methanol to other shipping companies and to other industries, including the chemical industry. For instance, it could supply raw material to a methanol-to-olefins plant that another A.P. Moller firm, Vioneo, plans to build in Antwerp, Belgium.

Like HIF, C2X has a robust slate of plants in the works. It is planning e-methanol facilities in Spain and Egypt—both countries with ample renewable energy potential. The firm hopes to build a series of plants in North America with SunGas Renewables, which brings a biomass gasification technology developed at its parent, GTI Energy.

C2X’s flagship project is Beaver Lake Renewable Energy, a $2 billion joint venture with SunGas in central Louisiana. It will produce 500,000 t per year of methanol from wood fiber collected in local forest-thinning operations and from sawmill residues. Davis hopes to reach a final go-ahead for the project next year.

“What we are leaning towards in our first project is demonstrating that, at scale, you can take solid biomass, create a clean syngas where all the carbon in it is of biogenic origin, and then you can convert that syngas into something useful,” Davis says. “And we’re starting with methanol.”