San Francisco-based startup Siluria Technologies has attracted $120 million in venture capital from the likes of Saudi Aramco and Paul Allen on the promise that it has discovered a Holy Grail of the petrochemicals industry.
Siluria Technologies' new ethylene plant is a 4-story-tall maze of pipes and valves and pressure vessels. If it were a standalone plant it might be impressive. But this one is tucked in among dozens of giant petrochemical complexes along the Houston Ship Channel and situated within a larger polypropylene site operated by Brazilian chemicals giant
So how does this facility stand out? Because it's unique. All the rest of the world's ethylene is made the old-fashioned way: by breaking apart larger hydrocarbons such as naphtha (sourced from crude oil) or ethane (found in natural gas). In contrast, Siluria's technology is all about building up ethylene out of smaller methane molecules. The plant takes in purified methane, mixes it with oxygen in the presence of a revolutionary catalyst and creates the plastics feedstock ethylene.
Ethylene, the single most commonly produced petrochemical in the world, is the basis for myriad plastics like polyester, beverage bottles and PVC. It's vital for the production of solvents, coatings, antifreeze and pharmaceuticals. By some estimates the worldwide ethylene amounts to $150 billion a year. And there's so much cheap crude oil and natural gas flowing through the United States right now that up and down the Gulf Coast the world's biggest chemical companies have unleashed tens of billions of dollars in a building boom to expand ethylene production. ChevronPhillips Chemical Company is investing $6 billion to build an ethane cracker. Near Lake Charles,
Now why does the world even need a new way to make ethylene when the old way is good enough to attract so much investment? Because Siluria thinks its process, called the oxidative coupling of methane, can do it cheaper. That's mainly because methane is the cheapest, most plentiful part of the natural gas stream. At about $3 per mmBTU, you can spend just $20 to get the same amount of energy content in methane as there is in a barrel of oil -- which even at current low prices costs more than twice as much.
And also because there are massive supplies of "stranded" natural gas far from petrochemical centers like the Gulf Coast -- gas that in places like the Bakken shale too often just gets flared off because the costs of building out pipelines and processing plants is prohibitively expensive.
Siluria could some day provide a more economically viable alternative. "Anywhere you're making a bunch of methane, you'll have synergies with our technology," says CEO Ed Dineen. "And it's a better alternative than LNG for moving gas long distances."
Dineen will have a tough time gaining market share. Gas-rich Qatar has invested more than $50 billion in the past decade trying to squeeze more value out of its methane -- both by chilling it to -260 degrees and exporting it as LNG as well as by backing the construction of enormous gas-to-liquids plants.
Maybe they should give Siluria a try. Dineen claims that with oil prices at $50 a barrel, the Fischer-Tropsch process "just doesn't make money," whereas Siluria's tech deployed at an existing oil refinery should be able to generate a 40% rate of return even with oil at $40 a barrel, and a 100% return at $90 a barrel.
That could upend the business plan for the likes of
To be sure, Siluria is far away from displacing the old ways of making ethylene, let alone supplanting LNG or even Fischer-Tropsch. The new plant -- financed in large part by a recent $30 million equity injection by Saudi Aramco Venture Partners -- is capable only of making a ton of ethylene a day. Compare that with the 4,000 tons per day or more that those world-scale plants under construction will churn out. And Siluria won't even be selling the output from its plant, because the volumes aren't big enough to justify the expense of adding in all the ethylene purification equipment. "Data is the main product," says Dineen.
Right now, Siluria's engineers are working to replicate in the new plant all the experiments and results from their pilot plant near San Francisco. That's where they concocted the secret sauce of their process: the catalyst.
Catalysts are substances that increase the rate of chemical reactions without reacting themselves. They are vital to virtually every industrial chemical process, especially those that crack ethane or naphtha into ethylene.
For decades engineers had tinkered with catalysts that could help couple together oxygen and methane to make ethylene by enabling the chemical reaction to occur at a low enough temperature that the methane wouldn't simply get burned off. Another challenge is getting the reaction to stop with ethylene rather than continuing on to yield nothing but carbon dioxide and water.
CEO Dineen used to work at ARCO (since acquired by Lyondell, now Lyondell-Basell) as part of a team that tried and failed in the 1990s to perfect the process. Siluria's VP of operations Gary Koehler is also ex-ARCO as well as the former head of global engineering at Lyondell-Basell. Koehler says the best catalysts they came up with at ARCO only lasted a day; when they talk to former colleagues, "they are surprised we've cracked this nut."
You get the same story from Clinton Bybee, managing director of Arch Venture Partners and a co-founder of Siluria in 2009. Early on in Siluria's history Bybee was talking their catalyst breakthrough with a senior exec of an engineering company. "His response was, 'That's not possible; I've had a team working on this for a decade.' But now they're one of our commercial partners."
The catalyst breakthrough originated in the M.I.T. and University of Texas laboratories of Angela Belcher. She had no background at all in catalysts, but was fascinated by how molluscs like the abalone had evolved the ability to create proteins that selectively binded with inorganic minerals dissolved in seawater to help form amazingly strong shells. Wondering how humans could somehow mimic that miraculous manufacturing process, Belcher discovered that some bacteriophages -- viruses that infect bacteria -- also had a tendency to attach themselves to inorganic materials. She placed viruses in a solution with a variety of materials. She found one that liked to grab onto cobalt oxide. Another that preferred carbon nanotubes. To make more of these viruses, she simply gave them a bunch of bacteria to infect so they could reproduce. Belcher found that if she put enough such viruses together with sufficient material to grab onto, they would assemble the material into long strings, dubbed nanowires.
The application to catalysis wasn't obvious when Bybee and Arch licensed Belcher's technology from M.I.T. and the University of Texas. "It was good at making nanostructures that you couldn't make in any other way," says Bybee, who first leveraged the tech to launch a company called Cambrios, which uses it to make a silver nanowire "ink" solution now used in electronic touch screens and "e-paper."
It turns out these virus-assembled nanowires are a big help in building catalysts because ounce for ounce they provide so much more surface area for reactions to occur. "A lot of chemistry happens in that catalyst," says Dineen.
To further perfect their catalyst, Siluria's engineers have employed the kind of high-throughput testing utilized in pharmaceutical discovery to so far test 70,000 unique formulations. Dineen explains that the catalyst they now use is "not some exotic metal" but is a modified form of the mineral zeolite. "The art is more in the nanowire construction, and the doping with other elements."
So where does Siluria go from here? Proving that they can turn methane into ethylene at commercial scale is just the first step. At their pilot plant in Hayward, Calif. they have also devised a catalyst to enable the next step in their process: turning that ethylene into gasoline.
Siluria has already partnered with gas-engineering giant
Both Dineen and Bybee, of Arch (which owns 17% of the company) say their objective is to IPO Siluria, hopefully before the end of 2016. Other investors include billionaires Paul Allen's Vulcan Capital, Kleiner, Perkins, Caulfield & Byers and The Wellcome Trust.
Bybee is confident that that Siluria will not meet the same fate of so many flaky green energy companies that have tried and failed to with woefully uneconomic approaches for making lackluster fuels. "This is different from turning corn stover into ethanol," Bybee says. "This is not a cleantech company. We are bringing a capability to use methane for something other than just burning it in a power plant." F