PORTLAND
MARKET
REPORT
August update
World Cup frenzy aside, nothing
discombobulated the Portland offi ce more
than the news that beer supplies might be
curtailed over the summer, because of a lack of
Carbon Dioxide (CO2). What’s that?! Are you
telling us there is a shortage of the one thing
that everyone says there is too much of in the
world? Make up your mind! Plus, why does it
affect beer and fi zzy pop?!
The fact that there is actually a Carbon
Dioxide industry is surely news to most
people. But in fact, manufactured CO2
not only goes into drinks (to make them
fi zzy), but also fi re extinguishers, surgical
equipment, fruit packaging (a protective
CO2 “atmosphere” extends shelf-lives), food
production (including the serious business of
crumpet manufacturing), refrigeration, coffee
decaffeination and most important of all, to
support vampire-goth bands of the 1980s
through the copious use of dry-ice.
“THE MAJORITY OF
CO2 PRODUCED IN
EUROPE COMES FROM
THE PETROCHEMICAL
PROCESS OF
MANUFACTURING
AMMONIA”
The CO2 used for all of the above is
a manufactured product, rather than the
“naturally” produced CO2 which is a result of
burning fossil fuels. However, it is not a product
that is manufactured directly, but is instead a
bi-product of other industrial processes. The
majority of CO2 produced in Europe (North
America is different because natural reservoirs
of CO2 exist), comes from the petro-chemical
process of manufacturing ammonia (the main
ingredient for fertilisers) and as with all things
petro-chemical, the oil and gas industry looms
“BEER SUPPLIES
MIGHT BE CURTAILED
OVER THE SUMMER”
large. This is because it is hydrogen from
natural gas, LPG or petroleum naphtha, that
is bonded with atmospheric nitrogen to make
NH3 – the compound commonly known as
ammonia. Furthermore, the fastest growing
alternative source of CO2 production comes
from the manufacture of bio-ethanol (for petrol
blending) – another product inextricably linked
to the fuel industry.
This year’s commercial CO2 shortage
was caused by both planned and unplanned
shut-downs of several ammonia plants across
Europe. Whilst frustrating to buyers, the
slightly chaotic nature of the shortages at
least should convince people that there are
no cartels existing in the CO2 market. This is
largely a function of how CO2 is produced (a
bi-product of something else), its low relative
value (global CO2 sales are circa $2bn per
annum versus $50bn for ammonia) and how
it is sold (contracted sales, rather than a spot
market). This means that despite the product
shortage, prices of CO2 did not rise and no
CO2 “speculators” were able to capitalise on
the situation.
But the shortages experienced this year
could be the start of a trend for several years
to come. CO2 demand in Europe remains
constant, whilst production via ammonia
manufacturing is moving East, because
of sky-rocketing fertiliser demand for food
production in India, China and south-east
Asia. This leaves the European CO2 industry in
a rather precarious spot and whilst increased
production of bioethanol may help, the
reluctance of EU governments to increase
ethanol blending limits to 10% (ie, E10 p etrol)
means that this industry is unlikely to come to
the rescue any time soon.
Yet the thought of a CO2 “shortage”
seems utterly absurd when from a climate
perspective, the world has a surfeit of the
stuff. Surely this would be an opportunity
to do something clever by taking waste (ie,
emitted) CO2 and using it for commercial
purposes? There are already ideas out there,
including one project that is testing whether
CO2 from power generation can be bubbled
through water to stimul