Executive Q&A viewpoint

Erik C. Scher, Siluria Technologies

Emerging technology solutions to address growing petrochemicals demand and gas production are meeting with intense interest. Amid volatile energy prices and expanding NGL markets in North America and elsewhere, Siluria Technologies is offering technology to “rewire the existing energy value chain,” according to Dr. Erik C. Scher, Siluria’s interim CEO.

Gas Processing recently had the opportunity to sit down with Dr. Scher to discuss the company’s technology solutions, ongoing projects and plans for the future.

GP. Last year, Siluria announced the startup of a demonstration plant in La Porte, Texas that marked the world’s first large-scale production of ethylene directly from natural gas through the oxidative coupling of methane (OCM). What is the status of the plant?

Scher. We recently marked the one-year anniversary of this important milestone for Siluria. Our primary goals for constructing the demonstration plant were to prove the performance of our revolutionary OCM catalyst at a commercial-ready scale and to provide validation of this disruptive process for our commercial partners. The demonstration plant has been successful in both of these objectives (Fig. 1).

Fig. 1. Siluria’s demonstration plant in La Porte, Texas started up in April 2015, marking the world’s first large-scale production of ethylene directly from natural gas through Siluria’s OCM technology.

Since the plant’s startup in early 2015, we have successfully completed 18 campaigns designed to replicate various operating conditions. We have also demonstrated feedstock flexibility, increasing the amount of ethane that can be incorporated into the process as a cofeed.

Both our proprietary catalyst and reactor design have performed in line with, or better than, our catalyst runs at the pilot scale. This validates our process and paves the way to move forward with commercial ethylene production projects underway in the US and abroad.

GP. In what areas of the energy value chain do you view your products adding the most value? Also, what are the next steps in your commercialization plans and how are these efforts progressing?

Scher. Our most fundamental value proposition is in rewiring the existing energy value chain—directly connecting segments in new ways, and allowing some costly and energy-intensive steps to be skipped altogether. Through our direct conversion of low-cost natural gas and ethane to high-value products, such as ethylene or transportation fuels, we enable upstream producers and midstream providers to realize more value from their existing production assets.

We also benefit downstream buyers of ethylene and fuels by offering a lower-cost feedstock, natural gas and the ability to produce economically at a scale better matched to their production needs.

With the success of our demonstration plant further validating the power of our offering, we are actively commercializing the OCM technology across a number of fronts. One of the key aspects of our technology is that it disrupts two very large addressable markets. Ethylene is the world’s largest commodity chemical market, and the gasoline and diesel markets are the highest-volume markets across the entire energy value chain. We are in discussions with existing and new strategic partners in the petrochemical industry and in the midstream business to integrate with their existing processing plants.

GP. How is the recent price volatility in the energy markets impacting your near-term and/or long-term plans?

Scher. The strength and flexibility of our product offerings have allowed us to move forward in our near-term commercialization plans, despite the commodity price downturn. In fact, many of our strategic partners see even more value in Siluria today because the traditional methods of expanding their businesses are very constrained in the current environment. The truly disruptive aspects of our technology—feedstock flexibility and the ability to economically scale down production—have become even more valuable given the present weakness in energy prices.

As companies pull back from large-scale investments like traditional crackers and derivative units, they still want to invest in growth, but not necessarily in multibillion-dollar bite-sizes. We can design our OCM plants to make ethylene in quantities that match small-scale derivatives production needs, creating an opportunity for us that other players in the marketplace don’t have.

Over the long term, Siluria’s technology will be relevant despite the normal ebbs and flows in pricing, because we deliver a low-cost means of manufacturing the world’s largest commodity products with a new feedstock of natural gas. Demand for the basic consumer goods produced from ethylene and for transportation fuels may fluctuate at times, but the combined market size is measured in trillions of dollars. It’s one of the reasons we see such massive potential at Siluria: We have built a completely new paradigm for a huge market that hasn’t seen true disruption in decades.

GP. How do you see the “new reality” of world energy markets?

Scher. Cyclicality in commodity prices is certainly not new. In our view, advances in drilling and production technology are the biggest drivers behind the current commodity environment. These advances have enabled the development of greater energy reserves at lower costs. In addition to commodity volatility, other factors, such as government regulations and unforeseen geopolitical events, make the need for new and improved approaches to adding value to natural gas more acute.

As a result, we believe abundant natural gas, in particular, will remain underutilized and relatively cheap. We were intentional in developing our unique product offering around the world’s most plentiful natural resource, and this “new reality” only reinforces our belief that finding new ways of utilizing natural gas to make higher-value products is game-changing.

Another important component of today’s market is the focus on finding more sustainable and environmentally friendly means of traditional chemical production. We help our partners meet this mandate in a number of ways. Because our novel processes involve the direct conversion of natural gas into ethylene or fuels, we skip certain steps in the traditional value chain that may create additional emissions.

Furthermore, our catalytic process generates energy in the form of heat, whereas most competing processes require input energy. Therefore, we avoid many of the traditional point sources for emissions, such as CO₂, NO_x, particulates and other air pollutants.

GP. Are you seeing opportunities to expand your technology solutions beyond natural gas to ethylene?

Scher. When we set out to tackle one of the most challenging chemistries in the petrochemical world, we had to build a unique set of technical capabilities. Over time, we’ve grown this toolkit into a robust innovation platform. Our successful transition into the commercialization of our first generation of OCM technology has demonstrated the power of this innovation platform, including fundamental material science, nanotechnology, catalyst development and manufacturing, scale-up, novel process design development, and demonstration plant infrastructure. Of course, all of this kit and knowledge is nothing without a world-class team of scientists and engineers.

Our focus today is on seeing the OCM technology through to full commercialization. We will continue to develop and improve upon this first generation of OCM and build our team with a long-term view of technology development. At the same time, we are identifying ways to expand our energy portfolio by incorporating new feedstocks and end products. For example, a couple of years ago, we initiated efforts to build upon the existing technology to convert ethylene into transportation fuels, such as gasoline and diesel. We now have a product offering that utilizes OCM and this additional conversion technology to produce fuels directly from natural gas.

Over the past seven years, Siluria has built the infrastructure to take low-value carbon sources and convert them into high-value products. We have an industry-leading research team, world-class development tools and strategic relationships with some of the biggest names in the energy industry. These partners, and our customers in the petrochemical industries, are hungry for advances, and they believe that Siluria’s growing portfolio of disruptive technologies will be at the heart of these advances. We are excited to leverage our teams’ successes to date to continue to deliver value to our current and future investors. GP

Dr. Erik C. Scher is interim CEO of Siluria Technologies. Dr. Scher is commercializing solutions to long-standing challenges in the chemical industry. At Siluria, he has been both an innovator and a leader in taking the company from a two-person concept to a 75-person operation that is successfully proving its proprietary oxidative coupling of methane (OCM) and ethylene to liquids (ETL) processes at pilot and demonstration plants in California and Texas. Dr. Scher has led efforts to develop novel materials and processes at three venture-backed energy companies over the last 14 years. He is an inventor on more than 50 issued patents and more than 100 pending patent applications, and he was recognized with the Massachusetts Institute of Technology Technology Review Top 100 Innovators Award in 2004.