CEH Report

Table of Contents

Abstract

The carbon dioxide business is traditionally thought of as the recovery and distribution of liquid carbon dioxide, since this is the product most commonly bought and sold. Liquid carbon dioxide is usually recovered as a gaseous by-product of industrial operations such as hydrogen production by the steam reforming of natural gas or the production of ethanol by fermentation. The gaseous carbon dioxide is liquefied for sale as a merchant product because liquid carbon dioxide can be transported more economically than gaseous and because many consumers use carbon dioxide for the physical properties associated with its being a refrigerated liquid. Liquid carbon dioxide reaches end users through a network of highway tankers, resupply depots and railcars. As a result of these circumstances, the carbon dioxide business is highly regional.

The major issue in the carbon dioxide market is balancing regional supply and demand. Carbon dioxide sources may or may not exist where demand is greatest. In addition, chemical manufacturing operations that produce a gaseous carbon dioxide by-product run according to demand for the primary product, not by demand for the by-product carbon dioxide. For example, ammonia plants typically run at full capacity in fall and winter, to be ready for spring fertilizer requirements. Carbon dioxide demand, by contrast, tends to be highest during the warm summer months when ammonia plants may be down for turnaround, so supplies are not often balanced with demand. Some of the aging ammonia plants have closed down on the U.S. Gulf Coast and some of them are underutilized, which further tightens supply. Also, ammonia plant operations are tied to gas futures, which could affect the functioning of the plant. If delivery contracts have a fixed price over a given timeframe, the producers may not be able to continue to operate viably if they are unprofitable. The supply from hydrogen plants has also been decreasing in the past few years as stand-alone hydrogen plants are being replaced by pipelined product. The decreasing supply from ammonia and hydrogen plants and a corresponding increase in supply from ethanol plants and natural gas wells could increase the price of carbon dioxide, mostly as a result of distribution-related factors, especially in the United States and Western Europe.

The following pie charts show consumption of carbon dioxide by major region and end use:

The rise in energy prices beginning during the middle of this decade spurred interest in gasification technologies and clean-coal processes to generate power. Huge quantities of carbon dioxide are generated as a result of these operations. In order to adhere to environmental standards, carbon capture and sequestration technologies are gaining importance. Current estimates of the cost of technologies for capturing carbon dioxide range between $34 and $61 per metric ton. The ongoing economic downturn has reduced energy demand and as a result, some of the major projects are on hold. However, when the economy turns around and with energy prices rising, these projects may serve as potential new sources of carbon dioxide.

China is continuing to emerge as an important player in the global market. For the past few years, the country’s consumption has been growing at rates close to 15–20% annually and is expected to continue to grow around that range in the forecast period. Capacity has almost quadrupled in the past decade since China opened its doors to Western enterprises. With the manufacturing base strengthening around Shanghai, demand in that area alone is believed to be over 500 thousand metric tons per year.

Liquid carbon dioxide consumption is likely to grow at an average annual rate of about 1.5% in the United States, about 1.4% in Western Europe and about 0.7% in Japan during the next five years.

Although atmospheric carbon dioxide has been identified as a contributor to global warming, these issues are primarily relevant to the industries that generate and release carbon dioxide to the atmosphere. The companies covered in this report recover and distribute by-product carbon dioxide or naturally occurring carbon dioxide but do not produce carbon dioxide.