183
Dimethyl Ether
The most complete estimate of the costs of DME is reported in the DME
Handbook (Ozawa, 2007 in JDF 2007). The results for different fuel prices
were presented for the time up to 2006, but even in the short time between
that and this publication, the oil price has doubled that level, and returned
to 2006 levels. The world has also been experiencing a financial and economic crisis that has not stabilized at the time this is being written. In
addition, the exchange rate of the dollar relative to many major currencies
has also changed. Compared to the euro, for example, the rate was 1.15 $/€
in the January 2002 compared to 0.64 $/€ in 2008, nearly a factor of two. The
dollar exchange rate is important, since it is the currency of international
oil trading. These factors affect all costs involved in the production and
transportation of DME, as well as the process of obtaining capital for building production facilities.
As a starting point, Japanese estimates of DME economics from the year
2002 will be used (JDF 2007). This can give a first indication of at least the
relative importance of the factors that go into determining the price of DME.
It might be considered as a sort of worst case comparison for DME, since
the price of oil was very low at this time. If DME can be competitive at low
oil prices, it should also be competitive at high oil prices. In general, it can
be assumed that if oil prices increase, other prices will increase as well. The
amount of increase relative to the oil price is very uncertain.
In the calculation of DME economics, the price of energy is normally given
in U.S. dollars per million Btu (MMBtu). The standard energy content of a
barrel of petroleum is considered to be about 5.8 MMBtu or 6.1 GJ, based on
the higher heating value of the fuel. Then the price of oil in $/MMBtu can
be obtained by dividing the oil price in $/bbl by 5.8. That is, an oil price of
$50/bbl corresponds to a price of about 8.6 $/MMBtu.
In 2002 in Japan, the CIF (Cost plus Insurance and Freight) of DME was
estimated to be between $3.5/MMBtu and $5/MMBtu based on a natural
gas price for producing DME of $1.0/MMBtu to $1.5/MMBtu. Transport
costs were estimated at between 0.5 and 1$/MMBtu, depending on location,
which ranged from Indonesia to the Middle East. A similar production price
was estimated for coal, based on a coal price of $0.5/MMBtu. At the time
of that report, the price of crude oil varied between about $3/MMBtu and
$5/MMBtu ($18/bbl–$30/bbl). The oil price was based on actual deliveries to
Japan while the DME price was estimated. Note that the gas feedstock price
for manufacturing the DME is lower than that of crude oil. This emphasizes
the idea of using gas that is not readily available for large commercial or
domestic consumption, nor is it of a suitable volume for the investment in
liquified natural gas (LNG) facilities. This “stranded gas” has a lower price
than pipeline gas.
As a comparison to other fuels, for the 2002 time frame, LNG in Japan
cost between $4/MMBtu and $4.5/MMBtu, and LPG between $5/MMBtu
and $6/MMBtu. Compared to other fuels, then, DME can be seen to be
competitive. In a scenario with increasing oil prices, the critical point in
Dimethyl Ether
The most complete estimate of the costs of DME is reported in the DME
Handbook (Ozawa, 2007 in JDF 2007). The results for different fuel prices
were presented for the time up to 2006, but even in the short time between
that and this publication, the oil price has doubled that level, and returned
to 2006 levels. The world has also been experiencing a financial and economic crisis that has not stabilized at the time this is being written. In
addition, the exchange rate of the dollar relative to many major currencies
has also changed. Compared to the euro, for example, the rate was 1.15 $/€
in the January 2002 compared to 0.64 $/€ in 2008, nearly a factor of two. The
dollar exchange rate is important, since it is the currency of international
oil trading. These factors affect all costs involved in the production and
transportation of DME, as well as the process of obtaining capital for building production facilities.
As a starting point, Japanese estimates of DME economics from the year
2002 will be used (JDF 2007). This can give a first indication of at least the
relative importance of the factors that go into determining the price of DME.
It might be considered as a sort of worst case comparison for DME, since
the price of oil was very low at this time. If DME can be competitive at low
oil prices, it should also be competitive at high oil prices. In general, it can
be assumed that if oil prices increase, other prices will increase as well. The
amount of increase relative to the oil price is very uncertain.
In the calculation of DME economics, the price of energy is normally given
in U.S. dollars per million Btu (MMBtu). The standard energy content of a
barrel of petroleum is considered to be about 5.8 MMBtu or 6.1 GJ, based on
the higher heating value of the fuel. Then the price of oil in $/MMBtu can
be obtained by dividing the oil price in $/bbl by 5.8. That is, an oil price of
$50/bbl corresponds to a price of about 8.6 $/MMBtu.
In 2002 in Japan, the CIF (Cost plus Insurance and Freight) of DME was
estimated to be between $3.5/MMBtu and $5/MMBtu based on a natural
gas price for producing DME of $1.0/MMBtu to $1.5/MMBtu. Transport
costs were estimated at between 0.5 and 1$/MMBtu, depending on location,
which ranged from Indonesia to the Middle East. A similar production price
was estimated for coal, based on a coal price of $0.5/MMBtu. At the time
of that report, the price of crude oil varied between about $3/MMBtu and
$5/MMBtu ($18/bbl–$30/bbl). The oil price was based on actual deliveries to
Japan while the DME price was estimated. Note that the gas feedstock price
for manufacturing the DME is lower than that of crude oil. This emphasizes
the idea of using gas that is not readily available for large commercial or
domestic consumption, nor is it of a suitable volume for the investment in
liquified natural gas (LNG) facilities. This “stranded gas” has a lower price
than pipeline gas.
As a comparison to other fuels, for the 2002 time frame, LNG in Japan
cost between $4/MMBtu and $4.5/MMBtu, and LPG between $5/MMBtu
and $6/MMBtu. Compared to other fuels, then, DME can be seen to be
competitive. In a scenario with increasing oil prices, the critical point in