Coal and Carbochemistry

Coal is a fossil fuel formed from the decomposition of organic materials that have been subjected to geologic heat and pressure over millions of years. Because of its nature, the mineral is abundant, widely distributed across the globe, and constitutes one of the world’s largest sources of electricity. According to the International Energy Agency (IEA), coal accounts for one-third of the energy generated in the world and 41% of the global electricity production, and it is likely that it will remain a major source of energy in the coming decades.

There are an estimated 1.13 trillion tons of proven coal reserves worldwide, which are mostly concentrated in five countries: United States (22.1%), China (21.4%), Russia (14.1%), Australia (12.7% %) and India (8.3%) (BP Statistical Review of World Energy 2017). Almost all Brazil’s coal reserves (90%) are in Rio Grande do Sul. Regarding coal production, 7.7 billion tons were processed worldwide in 2015, and the five largest producers were as follows: China (46.11%), United States (10.5%), India (8.8%), Australia (6.6%), Indonesia (5.8%) and Russia (4.5%) (IEA).

Despite the increased share of renewable sources in the world energy matrix, as a result of an international effort to reduce emissions of greenhouse gases (GHG), coal is considered an important and reliable source of energy and will remain a vital component of energy supply. According to data from 2013, the world proven coal reserves would be sufficient to meet 109 years of global production (DPNM).

Since coal is the largest fossil fuel contributor to GHG emissions (45.9%), there are growing investments in technologies that increase efficiency and reduce the environmental effects of coal (the so-called clean coal technologies). Also, the possibilities of using coal were expanded through the development of carbochemistry- coal gasification technology that converts high ash content coals into carbochemical products.

China and other countries that play a minor role in this process have recently invested in carbochemistry. According to a study of Nexant, a consulting company, China alone has 86% of the world's coal gasification capacity of 200 million tons per year. The referred study shows projections for expanding the global installed capacity to 300 million tons per year by 2019.

Brazil holds 0.6% of the world's proven reserves of coal and accounts for only 0.1% of the processing of this fuel (BP Statistical Review of World Energy 2017). The coal source accounts for 5.5% of the energy matrix and 2.9% of the Brazilian electric energy matrix (EPE). As for installed capacity, 3.9 GW of installed generation capacity of coal-fired power stations is projected for the next decade (MME).

Brazil's proven coal reserves - 7 billion tons - are concentrated in Rio Grande do Sul, with 89.25%, followed by Santa Catarina, with 10.41%. According to data from the Ministry of Mines and Energy, Rio Grande do Sul has 28.9 billion tons considering proven and estimated reserves together. The State has currently an installed capacity of 880 MW, with potential to reach 8.1 GW.

Rio Grande do Sul has two mining companies: Copelmi Mineração Ltd. and Companhia Riograndense de Mineração (CRM) that extracted together 5,476,284 tons in 2016, of which 4,034,254 tons were processed. Of the 13 Brazilian coal-fired thermoelectric plants, four are in Rio Grande do Sul, accounting for 26.2% of the installed capacity. Four new plants are planned, with a future capacity of 975.2 MW.

To ensure the use of the coal reserves of Rio Grande do Sul for generating wealth and jobs, expanding the internal energy supply and increasing the security of the system, the state government, in partnership with the Federation of Industries of Rio Grande do Sul (FIERGS) and the National Union of the Coal Extraction Industry (SNIEC), have taken efforts toward the establishment of the first Carbochemical Hub in Brazil, based on a law approved in 2017. This legislation provides legal security to new investments. The coal reserves will be used for the production of Synthetic Natural Gas (SNG) methanol and by-products such as ammonia and urea. The Carbochemical Hub of Rio Grande do Sul will be formed by the Baixo Jacuí Carbochemical Hub and the Carbochemical Hub of the Campanha region. A policy targeted to the attraction of investments in the segment and support to projects in areas located close to coal mines was created.

The Government of Rio Grande do Sul offers tax incentives and monitors the environmental licensing processes, through the State Department of Mines and Energy (SME) and the State Department of Economic Development, Science and Technology (Sdect). Also, three public institutions – The State Bank of Rio Grande do Sul (Banrisul), the Regional Development Bank (BRDE) and the development agency Badesul Desenvolvimento - can contribute to the financial viability of the projects.

The development of the carbochemical chain is intended to provide Rio Grande do Sul with SNG and its derivative products for use as industrial and agricultural inputs and to supply the Brazilian and South American markets. Coal gasification can be used as an alternative to natural gas, which is currently imported by Brazil.

Sector Opportunities

• The construction of the Baixo Jacuí Carbochemical Hub, in the Baixo Jacuí coal region offers opportunities for national and international investors to finance the project, estimated at US$ 1.7 billion, and the establishment of partnerships to implement the production plants of ammonia, urea and methanol (estimated at US$ 932 million). The Hub comprises nine municipalities - Arroio dos Ratos, Barão do Triunfo, Butiá, Charqueadas, Eldorado do Sul, General Câmara, Minas de Leão, São Jerônimo and Triunfo – with estimated reserves of 3 billion tons. It will be formed by plants that produce SNG and its chemical derivatives essential for the industry and agriculture (ammonia, urea and methanol), which are currently imported by Rio Grande do Sul and the other Brazilian states. Copelmi, a company with expertise in mining, and South Korean Posco E&C, which has the technology for coal gasification, are responsible for the anchor project. The process conducted at the Guaíba mine will produce syngas, which, in turn, through a methanation process, will generate SNG to supply thermoelectric plants and for industrial use.

  The cooperation agreement between the two companies has already resulted in the development of gasification technology suitable to the type of coal found in the region. The project also counts on a market and feasibility study prepared by Nexant that revealed the following: potential natural gas demand (500,000 m³/day in Rio Grande do Sul), ammonia (Brazil, 2.0 million tons per year; Rio Grande do Sul, 50,000 tons per year), urea (Brazil, 5.8 million tons per year; Rio Grande do Sul, one million tons per year) and methanol (Brazil, 1.2 million tons per year; Rio Grande do Sul, 130 thousand tons per year). A third stage of the project contemplates another plant for the production of SNG, worth US$ 1.5 billion. In addition to being established in close proximity to the proven reserves of the coal mine of Guaíba, the Baixo Jacuí Carbochemical Hub is also close to the state's urban centers, with access to the existing pipeline infrastructure, and has a license to carry mining operations for 60 years.

• The Carbochemical Hub of the Campanha region in the municipalities of Aceguá, Caçapava do Sul, Candiota, Dom Pedrito, Hulha Negra and Lavras do Sul will use coal gasification to produce methanol in Candiota mines. It aims to supply biodiesel and other chemicals to meet the growing market demands in Brazil, reducing import dependence. There are opportunities for partnerships with national and international investors for project financing, whose projected rate of return is estimated at 17% and financial leverage of 70%. The companies involved are Companhia Riograndense de Mineração (CRM) and Vamtec S.A., in partnership with Synthesis Energy Systems (SES). CRM is a mixed capital company owned by the Government of Rio Grande do Sul, which includes four mines and estimated reserves of 3 billion tons of coal. The Brazilian company Vamtec S.A. develops products and services for the metallurgical, glass and steel industries. It provides carbon paste, carbon products and other inputs. SES, a Houston-based company with subsidiaries in China, will be responsible for the gasification technology. The group holds technology for the production of synthesis gas from sources such as coal, municipal solid waste and biomass.

  The project will include the supply of coal from the mine in Candiota, with estimated reserves of 1 billion tons of high ash coal and low-cost open-pit mining. Candiota's coal was tested at the Gas Technology Institute in Chicago, United States. The results of the tests contributed to the elaboration of the model for the gasification plant.