March 01, 2017

Consortium Positioned to Unlock India's Coal Gasification Potential

Stratas Advisors

This excerpt is from a report that is available to subscribers of Stratas Advisors Asia and Global Syngas services.

After two years of delay, the revival of the $1.2 billion Talcher project in Odisha, India, is likely to proceed to construction stages after selecting an undivulged technology provider. A techno-economic feasibility study of the project will be conducted and the coal gasification technology partner will subsequently be selected.

Talcher Fertilisers Ltd. (TFL), a joint venture comprised of Gas Authority of India Limited, Coal India Limited, Rashtriya Chemicals and Fertilisers, and Fertilizer Corporation of India Limited (FCIL) recently announced the selection of key process technology. The TFL consortium was founded in December 2014 to execute the project.

Presumably, the fertilizer synthesis unit technology was finalized, as another major step in the progression of the project. The project may be of added complexity, potentially integrating petroleum coke sourced from a Paradip oil refinery as well as potential supplemental natural gas feed. The existing shuttered unit at the site was previously run off of natural gas.

Non-finalization of technology, as well as protracted difficulty with securing the required coal feed, have delayed the implementation of the plant. The Board for Industrial and Financial Reconstruction ordered the closure of the Talcher unit in 2002 amid protracted natural gas supply issues and multiple periods of losses taken by FCIL, the shuttered plant’s former operator.

Under latest planning revisions, the Talcher unit will come online in September 2020, making it the second coal gasification facility to be brought online in India in the previous two years, after the start of a coal-based direct-reduced iron plant at Angul in late 2015.

The Talcher plant is one of potentially five closed urea units that may be revived using alternative feedstocks such as coal, including in Uttar Pradesh, Jharkhand, and Bihar. The Talcher unit would consume some five million tonnes per annum (MTPA) of coal to produce 1.2 MTPA of fertilizer. Milestone requirements mandate that the project’s tendering process complete by August.

Feasibility Review

 

Detailed planning documents based on pre-qualification criteria ahead of licensor selection indicate that TFL intends to establish the Talcher unit as an Ammonia-Urea Complex for the production of 2,200 tonnes per day (t/d) of ammonia and 3,850 t/d of urea through coal gasification. Synthesis gas for ammonia production ahead of derivative urea synthesis is approximately 243,000 cubic meters per hour. Co-production of ammonium nitrate, a key ingredient used in the manufacture of explosives used in the coal mining industry, is also featured in the plant design.

Requirements specify coal gasification equipment suitable for processing high-ash coals with ash content of 40%-47%. Greater utilization of lower quality but abundant, high-ash coal is a primary demand factor for latest-generation coal gasification technologies. The adequate realization of higher-efficiency processes to utilize feedstocks inherently lower in quality is a demand factor for a variety of downstream processing equipment related to the processing of coal after the product synthesis units.

The specifications require the gasification technology licensor to have demonstrated an applicable technology in commercial application in at least one proven operating plant with multiple coal gasifiers operating successfully at scales of a minimum of 60,000 cubic meters per hour of syngas.

The facility may integrate captive power generation, but may opt to secure electricity from Gridco. The same option is under consideration for the coal feed, which may either be captive, and proximal to the facility, or secured under long-term contract with MCL. Water would be supplied via the nearby Brahmini River.

increased shortage of natural gas, LNG, the non-completion of necessary distribution pipelines, the set price of natural gas, and the prioritization of domestic fertilizer production are demand factors for coal-based ammonia and urea production facilities in India.

India is increasingly keen to leverage domestic resources to underpin a range of production facilities, along with other undervalued hydrocarbons such as petroleum coke. Previous proposals by IOC and Essar Oil, along with the near complete refinery gasification application at Reliance Industries’ Jamnagar refining application indicates a sufficient maturation of gasification technologies for integration of a wider source of contexts in India. Nevertheless, significant additions in natural gas-based industries are also expected to put increased demand on natural gas supplies.

Global Syngas Service Project Analysis

 

The investment in the coal gasification unit at Talcher would see air separation unit investment of $174 million and some $144 million in Haber-Bosch equipment. India’s allocation of energy mix sees 61.5% devoted to coal for power generation in the context of an 8.61% reliance on natural gas. Based on our analysis, the facility will see an internal rate of return of 8.77% on an existing coal-based ammonia and urea basis, with capital reduction in the India and greater Asian context expected to increase the returns over this US-based cost estimate.

As with natural gas, coal price is a significant component of a coal-to-ammonia gasification plant’s operating cost. Thus, in our view, advantaged technologies efficiently utilizing traditionally undervalued hydrocarbons will be increasingly advantaged in the Indian context. In China, similar contexts led to a rapid expansion of coal-based industries, whose growth has been tempered but still robust, representing some $12.5 billion in capital investment per year to 2026. In the context of entire India, alternative gasification-based feedstocks, including coal and petroleum coke, represent some $14.396 billion in investment. On this basis, some $2.5 billion in air separation unit alone is anticipated in the projection timeframe to 2027.