January 3, 2013 Sean McWard

Q&A: How LanzaTech Sees the GTL Landscape Shaping Up in 2013 and Beyond

Ethanol & Biofuels NewsPublication: Ethanol & Biofuels News
Published: January 03, 2013
Author: Bryan Sims
(Reposted with permission by Hart Energy as seen in the January 3, 2013 edition of Ethanol & Biofuels News.)

Founded in 2005, New Zealand-based gas-to-liquid (GTL) technology developer LanzaTech NZ Ltd. embarked on an ambitious vision to be a dominant technology provider in the industrial bio-commodities arena. Its goal was simple: to develop and commercialize proprietary technologies for the production of low-carbon fuels that don’t compromise food or land resources.

Today, under the watch of CEO Jennifer Holmgren, LanzaTech is poised to make distributed GTL technologies a commercial reality. Holmgren joined LanzaTech in June 2010 from UOP LLC, a Honeywell company, where she was vice president and general manager of the Renewable Energy and Chemicals business unit. She brought more than 20 years of experience in the energy sector, including a proven track record in the development and commercialization of fuels and chemicals technologies.

In that role, Holmgren led UOP’s renewable business from its inception through to the achievement of significant revenues from the commercialization of multiple novel biofuels technologies. Holmgren also managed UOP’s strategic research and development (R&D) portfolio before she managed the renewables group.

Since its inception, Lanza has made tremendous strides scaling up its novel GTL technology, securing a bevy of partnerships involved in the industrial steel manufacturing industries such as Posco, Jindal Steel & Power, BlueScope Steel and Harsco; oil and natural gas firms such as Indian Oil and Petronas; chemical development partners such as Global Bioenergies, Invista and LCY; biojet fuel partnerships with Boeing, Virgin Atlantic and Swedish BioFuels, all while achieving several impressive technological milestones along the way.

The most recent milestone occurred in early December 2012 when LanzaTech announced that it teamed up with China-based steel producer Baosteel on a commercial-scale plant tapping steel mill waste carbon monoxide (CO) to produce ethanol via a biotech scheme.

In the run-up to a larger-scale plant, the partners, in the meantime, successfully launched a 100,000 gallon-per-year “pre-commercial” ethanol demonstration-scale production unit at one of Baosteel’s steel mills outside Shanghai, China. In March 2011, the companies formed the “Shanghai Baosteel LanzaTech New Energy Co.” joint venture to commercialize LanzaTech’s technology in China.

Ethanol & Biofuels News (EBN) caught up with Holmgren to gauge how the company’s GTL technology is progressing, it’s unique technological characteristics, the firm’s take on the GTL space in general and what LanzaTech’s plans are in the coming year as it continues toward commercialization.

EBN: What specific skills or complementary strengths did you acquire at Honeywell’s UOP unit as vice president and general manager of renewable chemicals and fuels that you might be now applying in your current role as CEO of LanzaTech? In other words, are there synergies in any way?

Holmgren: If you take the view that UOP is a technology company and it has, as its core business, to introduce new technologies, which means the need to both do the technology scale-up piece, as well as then being able to bring a technology to market, sell it and so forth, that, I think, is the biggest learning I got from UOP; how to be able to do that. It’s not an easy thing to do, and it’s not easy from a number of perspectives.

The first is making sure that you’re doing all of the things that are required to help or make something scale. Every time you go to the next size, you don’t just make things bigger. There are always a number of adjustments that need to be made, and so the net result is that there are a lot of things that have to be done right.

In my mind, one of the big things is also really related to culture and the culture of the company. You start off a company at an invention stage, but to actually be able to commercialize a technology you’ve got to do what I would call innovation – you have to marry the science to engineering. Science and engineering don’t think the same way. That’s one thing I learned at UOP. You have to learn how to balance them so you don’t squash.

Another thing I learned about scale at UOP is how to convince a customer to be first to adopt a new technology. We always used to say: “Everybody wants to be first to be second.” So, that new technology introduction to the market is just as important in my mind as the science. To me, those are the things that I’ve learned at UOP.

EBN: Certain GTL technologies, like LanzaTech’s, are now rapidly improving so that they are capital light and feedstock flexible, greatly improving the economic viability of their respective projects. Do you believe the biofuel/alternative fuel space in 2013 will be defined by the rise in GTL technologies and the proliferation of distributed GTL strategies?

Holmgren: First of all, I really believe that for GTL to be successful, the distributed strategies have to work as well. You’ve got big GTL projects out there, like in Qatar with Royal Dutch Shell’s “Pearl GTL” project and Sasol’s “Oryx” GTL plant also in Qatar, which will always define GTL. Those big GTL projects are important for GTL to be successful, period.

But, then I think the next innovation in GTL has to be about distributed strategies. For GTL to come into its own, it needs to also be able to fit in a distributed, smaller context. That is definitely what we’re working on very hard. That’s why Petronas invested in us, and that’s what they were interested in.

Now, is distributed GTL going to come into its own in 2013? I doubt it. I think it’s going to take about three years for people to really start to see GTL as a viable distributed play. But, with all the gas now, that’s going to be the incentive to really think of it that way.

EBN: Because LanzaTech’s core technology platform involves employing a GTL pathway using waste- flue gases as feedstock for the production of fuels/chemicals, what are you finding are the toughest challenges for scaling up such a technology – either from a technical and/or economical standpoint? How is the company currently overcoming these challenges?

Holmgren: From a technical perspective for us, it’s all about scaling up and getting to the next larger size. For us, the challenge is related to technology. I’m not seeing a market challenge in that we’ve been very successful in help working with partners who understand why we do what we do and how it is we do it. I feel our challenges relate to convincing ourselves that we can get to scale and convincing ourselves that we can get to scale economically.

There are a lot of milestones that we have to meet so that we’re not just a scaled up really expensive GTL technology. Our challenges are continually driving down the economics and driving down the utilization of valuable resources such as water, energy consumption to feed the process.

As for challenges related to feedstock and how that plays into the economics of our process, the minute you want something, it isn’t free, period. You still have a cost to deliver it, but even without the cost to deliver it the feedstock itself can never be free if you need it. Something like carbon monoxide – if you try to negotiate for a free CO – that won’t work because CO has some residual energy value. You can combust it and use it to do at least some combined heat and power. You’re going to have to pay for its BTU value or some approximation for it.

Also, let me tell you about the way I think about feedstock progression. I have focused the company initially on a waste steel mill or industrial gas. The reason for that is because that is a point source. That is a feedstock that is available at a location. I don’t have to transport it. I don’t have to collect it. Those things add cost. What you want is to scale and drive down your cost and then what that allows you to do is access more and more expensive feedstock, or feedstock that has to be made. For example, if I drive the cost of my technology down I can afford to collect a feedstock like biomass. I can afford to gasify it as I keep driving the cost down. If I can get to some place where natural gas is accessible, I can reform it. Reforming natural gas is cheaper than gasification.

The way I think about commercializing technology is as I drive the cost of our technology down, I can afford more and more expensive feedstock and the cost of the feedstock includes moving it around, collecting it and processing it.

EBN: LanzaTech touts that its GTL technology is “flexible to the hydrogen content in the input gas and tolerant of typical gas contaminants,” according to its website, such as sulfur, which bypasses the need for costly scrubbing. How do you see this as a potential competitive advantage for your company compared to other GTL systems?

Holmgren: One of the beauties of using a biological organism is that you’re talking about molecules, like sulfur and nitrogen, which these organisms need so you’ve got these things that are traditionally considered contaminants are not contaminants in this system. It’s not that we’re getting away with anything; it’s inherent to the system that we’re working with.

On the hydrogen side, we’ve optimized an organism that is able to convert CO without using hydrogen and the reason for that is it does its own water-gas shift. What it does is it sees the CO and it can use that for carbon, but it can’t make products. If it doesn’t have hydrogen, organisms are resourceful. They find a way to survive. If it’s got hydrogen, it will use it. One of the advantages is, relative to GTL, you’ve got to give it enough hydrogen to make liquids. That’s one of the issues with Fischer- Tropsch, in fact, it needs a lot of hydrogen. Our organism doesn’t need to be fed that.

The world is focused on stream-methane reforming, which is not particularly efficient because you reject a lot of carbon in the process. If you actually look at the carbon balance from the natural gas when you’re doing steam methane reforming, you waste a lot of it because you have to produce hydrogen.

There are more effective carbon-retention strategies that you could do, such as partial oxidation, which hasn’t been used for decades as much as steam methane reforming because people need hydrogen and steam methane reforming is the best way to take natural gas to a good COhydrogen ratio for hydrogen-consuming chemistries. But, you can get away from that if you don’t need all that hydrogen so you might be able to better utilize the carbon in the natural gas by doing partial oxidation or by doing dry reforming … approaches that don’t get used that much because people need the hydrogen. So, when you don’t need the hydrogen, you can imagine combining our technology with less-known approaches, which are better at carbon retention.

EBN: Is LanzaTech considering capturing stranded methane at oil fields or other natural gas exploration sites as a potential means for capturing feedstock? If so, is this a feasible option for LanzaTech?

Holmgren: We can reform methane if we want to get hydrogen. We can use hydrogen if we have it, but we don’t have to have it is the key I think to our technology. We can use CO only or we can use CO plus hydrogen.

We have some partners who are working with us on direct-methane conversion through a biological route. Now, we can leverage our reactor systems because getting in insoluble gas to an organism is part of our technology and then they can work on the organism because we’re not experts on a methane-converting organism. We’re experts on the CO-converting organisms. That’s another approach to natural gas. It may be more long-term, but it’s a direct biological conversion so you don’t have to reform it. So, that’s another approach to GTL.

We’re already working on natural gas-type projects, but in terms of commercialization, we’ll be operating probably a waste-flue gas project by early 2014 and natural gas-fed projects will follow shortly thereafter.

EBN: I see LanzaTech still sees biomass gasification into liquid fuels and biochemicals as a viable option as evidenced by the acquisition of the former Range Fuels cellulosic ethanol plant site near Soperton, Ga., in January 2012. What’s the status of this project? When does the company expect to begin operations at the site?

Holmgren: The equipment to do the gasification is still there. Almost everything on site wasn’t working when we acquired the site, so we were trying to get all of the pieces of the equipment shaken down and started up, and then we’re going to put our technology on the back-end.

We bought that site to do a lot of the chemicals production more than fuels production. We aren’t necessarily going to do biomass-to-ethanol as a high priority, but perhaps biomass-to-butadiene and biomass-tojet fuel. As we develop our chemicals strategy, we’ll be putting the technology there.

The first priority for us is to get the biomass gasification system up and running. We’re working on that now. We should be in good shape by middle to end of this year. Then, in 2014, as our chemicals technologies get to the point where we want to scale them, we’ll be putting those in play.

EBN: On the downstream side, I understand LanzaTech is developing a portfolio of chemical and fuel products for a variety of markets with multiple partners – (i.e. butadiene, butanediol [BDO], ethanol, biojet fuel, etc.). How are these respective projects progressing at the moment? Also, which of these chemical products have the least barrier-to-entry for LanzaTech in terms of immediate revenue generation (“low-hanging fruit”) as it continues along its commercialization trajectory? Which might be more longer-term targets?

Holmgren: The organism we use right now naturally makes ethanol and BDO. And, of course, BDO can go to butadiene. For us, the nearest in terms of marketability to gain short-term profitability are the two that we do with the organism that’s already demonstrated and that we’re scaling. Drop-in biojet fuel is, of course, an extension of the ethanol technology because that’s thermochemical conversion.

We’ve also now shown in the lab we can make propanol, which of course you can make propylene from. We can make butanol, which can be used to make butylene. So, we’re starting to make a variety of products that are genetic modifications of our organism and, while that leverages our existing technology and reactor system, these will be longer-term to introduce to market.

Another thing that we’re doing, as part of our Petronas partnership, we have a different organism that leverages our existing reactor systems, which can convert CO2 and hydrogen directly to acetic acid. We’re going to demonstrate this technology this year in Malaysia.

EBN: LanzaTech has collaborations with multiple international partners with projects in progress in China and Southeast Asia. Can we expect the company to forge additional ventures in North America or South America?

Holmgren: Absolutely, we’re working those right now, so expect to hear more this year on that front.

EBN: Finally, what is at the forefront of LanzaTech’s agenda this year as it continues to strive to meet its scaleup milestones?

Holmgren: Our goal as a company is to stop having to have to go to investors to raise cash, which basically means that we’ve got to start making money and get to revenues. Our goal is to get commercial units built and operating. We’re working a couple in China based on success of the demonstration at Baosteel, which means the next step is scaling up and going to commercial. That’s one.

The next thing we want to continue work on is the chemical side of the platform. Key milestone is scaling ethanol, but the other piece is really about scaling the project we have with Invista on making butadiene to the point it’s commercially ready in 2014. Another milestone we’ll be concentrating on this year will be to get the direct conversion of CO2 technology demonstrated.

We need to be not just an ethanol story, but a fuel and chemical story, just like the petroleum industry. They make fuels for scale, chemicals for value and they’re able to sustain themselves that way. We feel we’re on that path.