Japan in race to commercialise new fuel by 2006
Date: 14-Mar-02
Country: JAPAN
Author: Keiko Takagi
Two separate Japanese joint ventures - one led by Mitsubishi Gas Chemical Inc and another by Japanese steel maker NKK Corp - are aiming to begin mass production of dimethyl-ether (DME), which is commonly found in hair sprays.
DME, made from natural gas, emits no sulphur oxide or particle matter and only small amounts of carbon dioxide. Currently, Japan produces about 10,000 tonnes of DME a year, mostly for use in hair sprays.
Backers of DME say it could eventually replace liquefied petroleum gas (LPG) or gas oil as the main fuel for some vehicles and power generators.
Mitsubishi Gas plans to build a $500-$600 million plant in Western Australia by the end of 2003 with annual capacity of 1.7 million tonnes of DME by 2006.
NKK is considering building a DME plant in gas producing countries such as Indonesia, Australia or the Middle East.
"In the near-term, the most likely user for DME is the LPG industry in Japan," said Yotaro Ohno, NKK's general manager of environmental solutions.
He said about 20 percent of Japan's imported LPG - enough to meet demand in the industrial sector - could be initially replaced by DME.
"I can easily see DME replacing about 20 percent of Japan's imports of LPG when DME imports begin in 2006. If that takes place, LPG buyers could have a bargaining-power to LPG producers," Ohno told Reuters in a recent interview.
LPG is used to heat Japanese homes in winter or to run power-hungry machinery at factories - for example, melting steels at metalworks companies.
DME is of a similar quality to LPG, allowing it to replace LPG without too many adjustments to infrastructure.
Japan imports about 15 million tonnes of LPG a year, the bulk from the Middle East.
Japan's government said in a recent report that it expects initially to import between 1.4 million and 2.4 million tonnes of DME a year from offshore Japanese plants from 2006.
The search for cleaner fuels has been a part of Japanese government policy since 1997 when industrialised nations agreed in the Japanese city of Kyoto to cut carbon dioxide emissions by an average 5.2 percent from 1990 levels by 2012.
Greenhouse gases, which come mainly from burning fossil fuels, are thought to cause rising global temperatures. U.S. President George W. Bush has rejected the Kyoto pact and instead outlined a voluntary plan to slow the growth of global-warming gases.
REDUCE PRICES
Yet some industry sources say several hurdles need to be overcome before DME can be widely used, including cutting its cost and getting regulatory approval in the auto industry.
"We have the necessary technology to produce DME," Norio Konishi, general manager at Mitsubishi Gas Chemical's planning development division, told Reuters.
"We are confident that if we start mass production, we could offer DME at much lower prices than that of LPG," he said.
Japanese prices for LPG are set by producer Saudi Arabia, often making them less competitive than other fuels. Rising demand for LPG in Asia is also expected to push up prices over the longer-term, causing many companies to hunt out alternatives.
NKK and Mitsubishi Gas both targeting DME production costs similar to those for production of liquefied natural gas (LNG), also a clean fuel which currently costs about two yen per megacalorie to produce. About 129 yen equals one U.S. dollar.
Although DME is expected to gain widespread use, sources say it will take some time before taking root in the automobile industry because of costs and regulatory issues.
Yuji Morita, senior analyst at Japan's Institute of Energy Economics, said DME makers must prove to automakers that DME has high fuel efficiency and is cost-effective.
They must also overcome regulatory hurdles and convince the government to promote and mass-produce DME-power cars, engines and batteries.