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Syntroleum CEO Jack Holmes holds up vials of black rendered poultry fat and while Fischer-Tropsch wax. Both can be refined into clear synthetic diesel or jet fuel. |
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| Ken Agee, founder and chief technology officer, explains Syntroleum's work in refining Fischer-Tropsch (FT) products into high-quality fuels. |
The Syntroleum Corp. team and its investors always knew their technology was solid. That confidence was renewed when the company signed a deal with Tyson Foods Inc. to commercialize its refining technology - turning animal fat into renewable diesel and jet fuels. With that process under its belt, Syntroleum plans to turn to biomass gasification.
Ken Agee was working as a chemical engineer for a pipeline company 23 years ago when he first became interested in finding a way to use surplus natural gas. He read about Fischer-Tropsch (F-T) technology during his lunch breaks and built a homemade reactor in a garden shed in his back yard. Three years later, he quit his job to work on the project full time.
Agee assembled a team and formed GTG Inc., which later became Syntroleum Corp. To date, the Tulsa, Okla.-based company has amassed nearly 160 patents on its work. "In the early days, we tested 1,000 different catalyst combinations," Agee says. In the past decade, the company has come close to seeing its technologies commercialized, particularly when oil prices were high enough to make the capital-intensive F-T process cost effective. The U.S. DOE helped fund a demonstration plant to scale up the Syntroleum process and produce 400,000 gallons of synfuels for testing in military jets and diesel applications. Syntroleum supplied 100,000 gallons of the synthetic JP8 jet fuel it produced from natural gas in the Cartoosa demonstration facility to the U. S. Air Force. It passed the tests and is now certified for use in a 50 percent blend with petroleum-based jet fuel in B52 bombers. The Air Force intends to certify all of its aircraft to fly on the blend by 2011.
With that project complete, Syntroleum was in the process of mothballing the demonstration plant when management challenged its team of chemists and chemical engineers to come up with other uses for their technology. In one of those "ah-ha" moments, the group realized the chemical structure of triglycerides is similar to the F-T waxes refined in the company's patented and trademarked Synfining process. Lab testing confirmed that fats and oils could be refined into high-quality synthetic fuels, and identified the needed adaptations to create what the company has trademarked as Biofining.
In making the fat connection, Syntroleum has identified an application for the simplest and cheapest part of its process - the refining step that follows the Fischer-Tropsch reaction. "We couldn't do a $1 billion project," says Agee, referring to the estimated cost to complete an F-T Synfining facility. "We can do a $150 million project." The company's business development group created a short list of potential partners and this summer closed a deal with Tyson Foods Inc. The joint venture promises to bring two decades of research and development to commercialization, giving Syntroleum a positive cash flow for the first time. "It's been the most wonderful shot in the arm for the employees and investors to be not just a technical success, but a financial success," CEO Jack Holmes says.
In June, Syntroleum and Tyson announced a joint venture to create Dynamic Fuels LLC. The deal involves building multiple, stand-alone facilities producing "ultra-clean, high-quality, next generation renewable synthetic fuels using Syntroleum's patented Biofining process, a 'flexible feed/flexible synthetic fuels' technology," according to Tyson. The first facility expected to be built somewhere in the mid-South will produce about 75 MMgy of fuel from low-grade animal fats, greases and vegetable oils supplied by Tyson. The $150 million project is targeted to be on line by 2010. The price tag includes a contingency for unanticipated expenses in building the first facility. Then the work will begin to add biomass gasification capabilities to the front end of the Biofining plant. A third-party will be recruited to supply the gasification technology and Syntroleum’s technology will be added to convert the biogas into F-T products that can be refined in the same Biofining plant as the fats.
Syntroleum has been riding a wave of publicity created when it inked the deal with Tyson, telling its story on television, making a presention on Wall Street and providing tours of its Tulsa facilities as the company begins the work of raising its share of funding for the joint venture. Standing beside the structure of pipes and tanks, Sid Schmoker, manager of facilities maintenance, explains how the company's F-T technology works as he guides a tour of Syntroleum's demonstration plant for Biomass Magazine. The $60 million plant demonstrated the company's technology using natural gas as the feedstock to manufacture synfuels. Biomass-to-liquid or coal-to-liquid will require adding a gasifier and syngas clean-up to the front end of the Syntroleum process.
Jim Engman, manager of catalyst testing, continues the tour at the Syntroleum F-T laboratory in another part of Tulsa, where a bank of small reactors and a room full of monitors permit multiple test runs, while the researchers tweak process conditions to see how well they can control the outcome. Across town, at Syntroleum headquarters, researchers in another set of laboratories are running tests on dozens of fat samples from Tyson.
F-T is not a new process. The Germans used the technology to produce fuel from coal during World War II to power its military. Sasol Ltd., based in South Africa, became the world leaders in F-T technology when an international embargo during the country’s apartheid regime stopped oil imports. In the rest of the world, cheap oil has discouraged the development of F-T technology, which requires oil prices above $50 per barrel to make it economical. Syntroleum targeted its F-T innovations to stranded gas reserves - the natural gas that gets flared off oil wells in areas where there's no access to natural gas infrastructure. As the price of oil has climbed, the economics of recovering stranded gas has improved.
The process starts with syngas coming from a gasifier. The incomplete combustion in the gasifier produces carbon monoxide and hydrogen, along with tars and particulates that have to be scrubbed out, Agee explains. Earlier this year, the company took two bench-scale reactors to Eastman Chemical Co.'s coal gasifier in Tennessee for a 100-day trial. Agee considers gasified coal, which contains sulfur, arsenic, mercury, iron and other metals, the ultimate test of whether syngas from multiple sources of biomass can be cleaned up enough to avoid killing the F-T catalyst. Unfortunately, there is no commercially operating biomass gasifier to test its theory. However, with the results from the coal gasifier in hand, Agee is confident that biogas from any biomass source can be cleaned adequately. "We consider coal the worst case scenario," Agee says.
Once it's cleaned the syngas is piped to the F-T reactor. One of Agee's breakthroughs was developing a catalyst that would not be killed by nitrogen. In the case of gas-to-liquids, the innovation permits the use of compressed air and eliminates the need for oxygen purification, thus reducing capital costs and boosting safety. Another unique feature of the Syntroleum F-T technology is its ability to remove a stream of the catalyst to be regenerated while the plant is running. The Syntroleum process uses a slurry-phase reactor. Clean syngas is introduced at the bottom of the reactor and bubbles up through the catalyst and wax. The catalyst facilitates a chemical reaction which reorganizes the carbon and hydrogen molecules into long carbon chains of paraffinic waxes along with light oils and water.
After auto-thermal reforming and the F-T reactor, the liquids enter the final process which Syntroleum has patented and trademarked as Synfining. This last step uses hydrocracking and hydroisomerization to break the long chains in the waxes into the desired fuels - diesel or jet fuel. When processing synthetic diesel, the coproduct is 20 percent naptha, and if synthetic jet fuel is the end product it results in 40 percent naptha, Agee says.
Jet fuel is Syntroleum's target market. The U.S. Air Force's goal is to replace half of the 1.6 billion gallons of domestic fuel it uses per year with alternative fuels by 2016, Holmes says. "The current alternative fuels from ethanol and biodiesel can't meet the [Department of Defense] specs," he says. "Our technology will." This summer, Syntroleum signed a contract to supply 500 gallons of the synthetic jet fuel made from fats to see if it performs the same as its synthetic JP8 jet fuel. "It will," Holmes says, adding that in their lab tests, the fuels from renewable fats exactly match the fuels from natural gas.
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Flying high after its success with the Air Force and its deal with Tyson, Syntroleum has raised the initial $4.25 million, matched by Tyson, to conduct site selection studies and prepare the process design package and front-end engineering. The challenge will be to raise the next $70.75 million, which is the remainder of its share of the capital required to build the first plant. In the meantime, Syntroleum executives are pleased with the joint venture. "Tyson has turned out to be a wonderful partner," Holmes says.
One resource Tyson brings to the table is its governmental relations division which is helping with state-level negotiations as sites are considered. Government support of renewable diesel will be an important component for Syntroleum's success. The biodiesel industry protested this summer when Tyson agreed to supply fats to Conoco-Phillips to produce renewable diesel and collect a $1-per-gallon tax credit. Biodiesel supporters are concerned that refinery-scaled projects will dominate feedstock supplies and qualify for tax credits that were intended to aid the fledgling biodiesel industry. Holmes makes a distinction between the oil companies' plans to coprocess a small amount of fats with crude oil in the refinery and Syntroleum's renewable diesel. "We are different," Holmes says. "We are stand-alone, new construction. We create new jobs, and we're making 100 percent renewable diesel." He's hoping the attempts to rewrite legislation to prevent oil companies from getting the federal biodiesel incentive will not rule out incentives for small companies like Syntroleum developing new technologies and utilizing 100 percent renewable feedstocks. At current prices, the biodiesel tax credits are crucial, he says. "Our cash margins are about $1 per gallon, which includes the $1 tax credit," he adds. In the company's projections, the first plant making 75 MMgy per year should net $60 million per year to cash flow, which will be used to pay off the investment.
Detailed projections for the biomass system have not yet been worked out, but initial numbers show promise. Agee estimates the biomass gasifier and F-T reactor will cost two to three times more than the $150 million needed to build the first Biofining facility. However, the higher capital investment will be offset by lower feedstock costs, he says. While fats cost about 20 cents per pound, biomass is expected to cost $20 to $60 per ton. "I think all the components are there to make biomass diesel," he says. "But they aren't there on a commercial scale yet." After 23 years of working out the details in Syntroleum's process, Agee's enthusiasm hasn't waned. "Part of the demonstration process is working out the bugs," he says with quiet confidence.