Strategy: gas instead of oil
Interview with Lurgi management

Following a large restructuring program, Metallgesellschaft now has four business units: Customized Systems, Process Equipment, Process Engineering and Plant Engineering. Part of Plant Engineering is now consolidated in Lurgi AG which has been re-established as an operational unit. The thrust of the new strategy is to make the transition from raw oil processing to “gas to petrochemical” production. How will the company drive the new strategy forward? Michael Strätling, Chairman of the Board at Lurgi, and Ludolf Plass, Lurgi Engineering Manager, provide the answers.

PROCESS: At the latest press conference, Klaus Moll, Board Member with responsibility for the large-scale plant engineering sector at mg, announced that the world
would be dealing with a radically different Lurgi, the “new Lurgi”. What is so new about it?
Strätling: We are doing something which really is totally new. We are the only ones who cover the entire “gas to petrochemicals and synfuels” chain. The source can be natural gas, associated gas from oil drilling operations, coal or biomass. Currently, the production chain is entirely oil based. That is a very broad field of technology, and there are a large number of suppliers. Lurgi has virtually no unique selling positions, and we were only one player in a large field of suppliers. In the gas production chain, Lurgi is the market leader in certain segments, and we are the sole owners of propylene technology.
PROCESS: If you look at metallgesellschaft and Lurgi as an outsider, you see a progression from 300 subsidiaries to a four segment strategy and then a two segment strategy. The corporation now operates with four business units. What can we expect to see next at Lurgi?
Strätling: Information about our new technological orientation and the accompanying workforce restructuring has not really penetrated to the outside world in the past two or three years. I am convinced that we are the front runners in these new market segments and that to some extent we are and will remain technology leaders.

PROCESS: Many see the relocation of corporate headquarters to Bochum in Germany as an interim measure which is intended to provide a more elegant route to separation from Lurgi.
Strätling: Rumors of this type always seem to resurface, and no firm is immune to them. First one company is up for sale, and then another. There are discussions at every plant engineering company about the large-scale plant business, not just at mg. If you recall, Uhde was up for sale, then it became part of the core business again. Of course we cannot know what is going on in the minds of our stockholders. There is no doubt that Lurgi has gone through a painful and very costly period of restructuring, but we have now gotten the right result.
PROCESS: How significant are the synergies with the GEA program?
Strätling: It can be up to 20 or 30 percent at a biodiesel plant. It is about ten percent at a bioethanol plant, but that can vary. At any rate, the synergies are greater for renewables than for traditional gas to chemicals. This includes cooling towers, heat exchangers, ventilators and some other systems depending on the project.
PROCESS: Now that you have virtually
ceased all activity in the oil segment, you are now forced to improve and expand your technology. What is your strategy?
Dr. Plass: We are in the process of strengthening our coal gasification capabilities. We have a gasification process for high-ash coal, and we are also looking at biomass, which is becoming an increasingly important topic. In other words, we are strengthening our gas generation business. We are using exclusive technologies that we have purchased and/or are using under licensing agreements as well as technology that we have developed in-house.
PROCESS: Does that mean that you are acquiring exclusive licenses from competitors or research institutes?
Dr. Plass: It could be a university, a research institute or a company that has developed certain things. One of Lurgi’s
great strengths is its ability to transfer processes from the semi-commercial stage to the reality of the large systems world.
PROCESS: Can you quantify your investment?
Strätling: Not this year, but we will do it. We always carefully evaluate costs versus benefits.
Dr. Plass: It is important to realize that we have two types of R&D. We run our own programs in our R&D facilities and finance them from our own resources for the most part. There are also subsidized projects, for example in Freiberg. (Editor’s note: in collaboration with the University of Applied Sciences in Freiberg/Germany, the company is working to find a significantly more economical way of generating syngas). Outside funding, including government funding and involvement by partners, is helping finance the Freiberg project. We are working very successfully, for example, with the American chemical company Eastman. We have acquired a PTA process. We agree on a research budget with Eastman to improve the process, and we jointly decide how much to spend. Our new generation ammonia technology is another example. It is based on Lurgi syngas technology and a matching ammonia technology from Casale. Cooperation of this type produces world scale plants that have lower production costs per ton than traditional plants.
PROCESS: In the polypropylene process and others, you are expanding your portfolio down the production chain. Are you not once again running the risk of straying from your core business and getting involved in things that you really do not fully understand?
Strätling: That is precisely why we are being very selective. Let’s look at the details. We use our own technology for methanol-based propylene and third-party technology to make polypropylene. We have had semi-exclusive rights to SABTEC’s polyethylene (LDPE) technology for quite
a long time. It is our intention to offer gas-based additives and synthetic fuels. We want to do the same with fertilizers. We can produce urea more cost effectively than ammonia.
PROCESS: Will you compete with Uhde in the fertilizer business?
Strätling: We also face competition in the methanol market. There are also other engineering firms that can build methanol plants.
PROCESS: That may be, but there you are number one, which is not the case with fertilizers.
Strätling: I believe that we will be successful with ammonia in the near future, meaning within two years. If the technology can produce what we expect, then we will be a serious contender in the ammonia plant construction market.
Dr. Plass: Our ammonia technology is pushing into a plant capacity range which is beyond what our competitors can currently offer. This is similar to what happened with methanol, where we made the jump to 5,000 tons per day, and we can prove it. We have been waiting for this development. Lurgi’s proven syngas technology, which will be substantially improved in the near future, puts us in a position where we can take on the competition in the ammonia business.
PROCESS: Does that mean that customers will accept this as a reference?
Dr. Plass: Of course. Otherwise we would not make any sales.
Strätling: Competition with Uhde or Kellog Brown in the ammonia business is relative. The ammonia market is currently 170 million tons and has an annual growth rate of 3%. This is an additional 5.1 million every year even without adding replacement of obsolete plants to the equation. The largest plant which we could build has an annual capacity of 1.3–1.4 million tons.
Dr. Plass: Renewable resources may turn into a significant trend. Iran is already producing methanol at competitive prices. The product is then shipped to Rotterdam and refined to make petrochemicals and/or synthetic fuels. Offshore feasibility studies have already been carried out in countries that have low cost gas to evaluate methanol production on board ships. Both the ships and the production plant can be built right in the shipyard, which drives costs down.
PROCESS: But we are talking about the future?
Strätling: No, if methanol prices fall,
these projects are definitely realistic. If logistics are managed properly, methanol can be transported at $20 per ton. Methanol producer prices are $60–$70. There has been collaboration between Iran and India as well as China in this field for some time. There is little interest in Germany and the rest of Europe. I suspect that petrochemical producers in Germany and other European countries are concentrating on oil-based plants, particularly in China. Interestingly enough, China does not have large oil reserves.