Kirk A. Benson, Chairman & CEO of Headwaters, Inc., has agreed to cover ahead the initial cost of US$6.6 million or Php 320 million for the Philippines “Coal Hybrid Liquefaction Project” Step-2 program, consisting of process engineering design of the Preliminary Front-end & Engineering Design or Pre-FEED, technology licensing agreement, and the immediate construction of the Fischer-Tropsch Process Demonstration Unit or FT PDU. The Project will produce over 60,000 barrels per day of ultra-clean, liquid fuels for transportation and 67-MW net power output that can be supplied to the national grid. This was announced today by Antonio A. Ver, President of H&WB Corp., and Headwaters development partner in the Philippines. Ver emphasized the construction of the FT PDU that would memorialize the viability on a scale-up basis of Headwaters Indirect Coal Liquefaction (ICL) technology. Total investment for these major activities would reach US$14.795 million. “This will catapult the project towards timely completion of project development activities and forthwith bring the project to the market for financial closure,” Ver said. He also added, “Headwaters is also signing a technology license agreement with H&WB in mid-March of this year. The term sheets for the Pre-FEED contract and license agreement are undergoing final review.”

Headwaters and H&WB have earlier funded US$3.2 Million in the Step-1, Project Pre-Feasibility study stage. The Final Report, which found the project techno-economically suitable for Philippines coals, was presented to President Gloria Macapagal-Arroyo on September 15, 2005 on the occasion of the United Nations Summit in New York City.

A three-step plan formulated for the project aimed to start construction of the plant in April 2010. The strategic partnership of Headwaters and H&WB dates back to November 19, 2004 when project development activities commenced. Licensing talks and negotiations started in May 2006.

The Step-2 program involves preparation of various ICL and Direct Coal Liquefaction (DCL) process design packages, detailed coal feedstock tests, including DCL, gasification and FT PDU tests, trade-off studies and detailed economic and sensitivity analyses, among others.
Ver added that, “the strategy behind the FT PDU is to cut the costly ‘ramping up’ period that hinders early demonstration of commercially available technologies by private industry.” The plant shall demonstrate Headwaters’ ICL technology consisting of an advanced ebullated-bed reactor and catalyst system for conversion of coal-derived syngas to ultra clean liquid fuels. Headwaters’ technology shall be integrated in a pilot-scale FT unit with the fluidized bed gasifier in the US Gas Technology Institute’s Flex-Fuel Test Facility in Des Plaines, Illinois. The FT PDU will be capable of processing approximately 770 Nm3/h of syngas and producing approximately 5 to 6 barrels/day of sulfur-free paraffinic naphtha and diesel fuels. The FT PDU is partially funded through grants from the US Department of Energy and the Illinois State government.

The FT PDU program shall involve: 1) the testing and demonstration of Headwaters’ advanced Coal-To-Liquid (CTL) F-T technology at a scale sufficient to support final commercial scale-up; 2) the evaluation and optimization of the F-T system’s configuration and performance with high volatile, high sulfur coal such as Philippines’ lignite; 3) resolution of commercialization issues of Headwaters’ CTL technology, including integration of the gasification, gas cleaning, and FT synthesis systems; and, 4) provide a test platform for technical support, including obtaining design data, process optimization, catalyst qualification, operator training, of their CTL projects in the United States and worldwide, particularly the Philippines Coal Hybrid Liquefaction project.

As explained by Dr. Cindy Cisneros-Tiangco, PhD, H&WB’s Vice President for Project Development, the project’s Step-1 study considered three different plant configurations: Direct Coal Liquefaction (DCL), Indirect Coal Liquefaction (ICL), and the Hybrid Plant that is a combination of DCL and ICL. The overall design of the CTL facility will use unique DCL and ICL technologies developed by Headwaters and its subsidiaries. In the DCL process, coal is converted into liquids via a catalytic reaction in one step. The DCL reaction takes place at high temperature and pressure and is in the presence of excess hydrogen. In this case, power and hydrogen have to be generated separately on site or imported. In the ICL process, the coal is converted into syngas (a mixture of hydrogen and carbon monoxide) via the gasification step. Then, the syngas is converted into liquid fuels via the FT process. The excess steam generated from these two steps is used to produce power for in-plant use and export.

The hybrid plant was determined to be the most attractive configuration for the Philippines because of its potential to minimize the amount of exported power and to produce hydrogen from syngas for the DCL reactor, and to minimize product refining through blending of products from DCL and ICL. The hybrid plant yields the most appropriate product mix that will meet the anticipated stringent specifications for clean transportation fuels. Furthermore, the hybrid plant configuration provides opportunities to integrate the energy recovery systems, hydrogen production, sharing common facilities, and economy of scale within the hybrid plant.

Based on the Step 1 study, the total coal feed rate is about 28,854 short tons per day (stpd) of lignite as-received basis or 17,300 stpd moisture and ash-free basis (maf) and 7,860 stpd of sub-bituminous coal as-received basis or 5,800 stpd maf. About 47 wt % (maf) of the total coal feed is consumed in the DCL reactor and the associated hydrogen production facility. The proposed hybrid plant produces over 500 metric tons per day of elemental sulfur, 67-MW of excess power for export to the grid, and more importantly, about 61,200 BPSD of coal-derived liquid including 11,100 BPSD of LPG. The C5+ liquid fraction is about 50,000 BPSD consisting of 27,200 BPSD naphtha, 13,400 BPSD diesel, 6,500 BPSD distillate and 2,800 BPSD gas oil. All CTL products have the advantage of low sulfur when compared with conventional petroleum products.

The project shall be the “Hub” for Southeast Asia for CTL conversion given the country’s strategic proximity to coal shipping routes, indigenous coal resources that are largely untapped, and coals from the Region. Significant is the fact that the project can effectively cut the country’s dependence on imported oil by at least 20%, producing ultra-clean transportation fuels at 40% cheaper than imported petroleum products, saves valuable foreign exchange, and more than ever, is the clearest and most solid infrastructure response in alternative energy development more so in the ever-increasing prices of imported oil.