North America is still the world’s largest regional market for industrial gases. This month’s magazine takes on a North American focus and in support of the Peter McCausland interview, gasworld has prepared this report investigating the region’s industrial gas activity and aiming to address concerns of a looming recession.

The North American region consists of the United States, Canada, Mexico and the Caribbean, including Puerto Rico. According to industrial gas consultancy Spiritus, the regional market reached $17.7bn in 2006 and has exhibited an average annual growth rate of 7.5% over the past 5 years.

Past 5 year activity
While the growth rate over the past 5 years sounds high, 2001 and 2002 saw a downturn from a peak in 2000. However, 2003 onwards saw buoyant activity, driven by an economic up-turn, low interest rates, high natural gas prices and investments in energy projects in both Mexico and Canada, which require substantial quantities of industrial gases.

The US still dominates this region, the gases business having grown strongly since the recession in 2002. Canada and Mexico have similar sized markets, thanks to the Enhanced Oil Recovery (EOR) business in Mexico.

All companies in this market have experienced high growth, but there has been associated restructuring and much of that has been well documented, so we will only refer to some of this activity. In summary though, Airgas has gained from the divestments made by Air Products, BOC and Linde, as Figure 2 shows with the impact of the restructuring over the past 5 years.
The major gas companies have continued to invest in HYCO projects in the US and ASUs, mainly in Mexico and Canada.

The Canadian Economy is interlinked with the US economy – exports to the US account for 80% of Canada’s total exports and the US contributes 70% of Canada’s imports. The GDP has grown at between 2 and 4% (average 2.4%) a year over the past 5 years, following a slowdown in 2001.

“Canada is evolving into a knowledge-based economy. Service industries now employ three out of four Canadians. More and more, Canadians work in offices, stores or warehouses rather than farms, mines, mills or factories,” says the Canadian Government.

Canada’s economic well-being is tied to many factors: the wealth of natural resources; the strength of its manufacturing and construction industries; the health of the financial and service sectors; dynamic trade relationships with other nations; and the ability to compete in a global marketplace.

Most people are aware of Canada’s mineral resources especially zinc, copper, nickel and uranium – the extraction and processing of which utilise a large amount of industrial gases. The country continues to be the world’s leader in uranium production and ranks in the top five for production of aluminium, zinc, gypsum, molybdenum, platinum group metals, salt, cadmium, titanium concentrate and asbestos.

Recently though, high oil prices have led to huge activity related to the oil tar sands in Alberta.

Controversially, these oil tar sands are boosting demand for industrial gases significantly but with growing concerns on the impact on the environment, both on land, through erosion and tree devastation, and in the air through higher CO2 emissions.
Economists forecast a stronger 5 year period for Canada with GDP growing at a fraction below 3% through to 2011.

The Canadian industrial gases market is well served by leading industrial gas companies – especially Praxair, Air Liquide, Linde (formerly BOC Canada) and to a lesser extent Air Products. Unlike in the US, there are few distributors of gases.
The actual industrial gases market reached $1.6bn but is set to grow at an average annual rate of 7% per year, driven by chemicals and energy production.

Significant project activity includes:
Air Products Canada
Air Products started up a new HYCO plant in 2006 to supply Suncor Energy and Shell Canada refineries located in Sarnia, Ontario. The unit produces in excess of 80 MMSCFD (approx. 80,000 Nm3/hr) from a steam methane reformer and is located at the Shell facility with a pipeline supply to Suncor.

The Mexican economy is healthy, with a GDP run rate of 3.6% per annum over the past 5 years, despite the recession experienced in 2001. GDP is expected to remain around this level over the next 5 years. The economy is highly dependent on oil tax revenues but there are concerns that without additional wells being discovered, Mexico will become a net importer of oil by 2012. Delayed privatisations means that investment in such natural resources are delayed.

Dependency in oil means that Enhanced Oil Recovery (EOR) projects such as the ones associated with Pemex in Ciudad del Carmen are likely to continue – which is good news for our industry. According to analysts in Mexico, this is expected to continue through to 2015, seen as the earliest date that any new oil is likely to be extracted. As a result, downstream processing and petrochemical projects will be delayed, while the petrochemicals business has lacked investment over the past 5 years. However, the steel industry is growing at 12-15% a year, spurred on by global steel demand.

The automotive industry is the single largest private industrial manufacturing sector built on the North Atlantic Free Trade Agreement (NAFTA) between the US, Canada and Mexico. Manufacturers in Mexico include Nissan, Renault, VW, Chrysler, GM, Ford, Mercedes Benz and BMW.

A major industrial sector influence on the Mexican economy is what is called the “bond or maquila” industry. This is a system of duty-free imports to be processed by these companies and was designed to take advantage of cheap Mexican manual labour. However, in recent times, the rise of China as an industrial power has made that benefit less attractive to US companies.

The gases market, valued at $1.2bn in 2006, has grown rapidly (CAGR of 12.5%) thanks to the energy sector and the investments made by various majors in the country, despite delays in privatisations programmes run by the Mexican Government.

The merchant market is currently a duopoly between CryoInfra (a jv between Air Products and the Infra Group) and Praxair, following the sale of Linde’s merchant gases business to Praxair at the beginning of this year. Linde remains involved in the EOR project at the Cantarell field where the company operates 4 large 10,000tpd plants and is currently constructing a 5th unit, due on-stream this year. This is the world’s largest nitrogen production facility and EOR project.
Praxair won two substantial contracts with Pemex including a contract to supply two 3,400tpd ASUs to Samaria, Tabasco at an investment cost of $90m. These are nitrogen-specific plants associated with EOR operations in the Gulf of Mexico and are due to go on-stream in late 2007, covering an oil field structure that includes Samaria, Iride, Oxiacaque, Cunduación, Pijije and Luna.

There are very few independents in Mexico but there are a number of distributors that act as agents for either CryoInfra or Praxair.
Figure 4 presents the market share in Mexico, showing the dominance of CryoInfra and Praxair. The gases market, despite the anticipated delays in investment in the oil and downstream sector, is still expected to maintain a healthy 10% per annum growth, driven mainly by the EOR sector.

United States
By far the largest market in the region and worldwide, the US industrial gases business has maintained reasonable growth since the recession in 2001/2 and the economic position has improved somewhat of late.

Praxair and Air Products dominate the $14.5bn market, but Air Liquide and Airgas have important positions. The data excludes the divestments required under the mandated requirements of the Linde/BOC acquisition.
If we include the 2007 market position, the main significant change will be the gain in Airgas from 11 to 15% market share and a combined market share of Linde of 10%. Other than that there will be very little change, but Praxair and Airgas continue to make acquisitions in the distributor part of the supply chain.

New ASU capacity additions
Tight supply and rising prices in the US market have made it necessary for major gas companies to start re-investing in production capacity. Most of the majors have announced capacity increases, particularly liquid, across the country.

These include:
Air Products’ announcement in early 2007 that it plans to expand its industrial gas production facilities at both its Ashland, Ky. and Reidsville, N.C. Facilities. The Reidsville facility, operating since 1967, will expand production capacity by nearly 400tpd and will be on-stream in the second quarter of 2008. The Ashland facility, in operation since 1963 and increased in capacity in 1990, will expand production by approximately 450tpd and will be on-stream during the third quarter of 2008.

Praxair announced in June that it would increase its bulk atmospheric gases production facilities in Fife, Washington, and Inver Grove Heights, Minnesota, in order to meet growing demand. Praxair will add 310tpd of liquid production capacity at its Fife, Washington, facility which produces oxygen, nitrogen and argon. The added production is slated to begin mid-2009.
“Our decision to move ahead with this expansion is based on continued demand for our products in the high-economic-growth area of the Pacific Northwest as well as our commitment to grow and support Praxair’s operations in the British Columbia, Canada, market,” said Scott Kaltrider, regional vice president-West for Praxair’s North American Industrial Gases business unit. Praxair will also add 150tpd of capacity to its Inver Grove Heights, Minnesota, facility in order to meet demand from oxygen pipeline and merchant customers. The added capacity is expected to be available in the second half of 2008.
Praxair also announced that it will expand its storage and industrial gas production capacities at its Kirtland, New Mexico facility. The expansion doubles the current storage capacity and increases production capacity by 100 to 150tpd over the next two years.

Air Liquide also announced that it will selectively expand production capacity in the U.S. to meet the growing demands of its key industrial markets. The company announced earlier this year that it would increase its production capacity for liquid oxygen and nitrogen by 50% for the Los Angeles market (on stream Q2 ’08) and will open a new carbon dioxide (CO2) facility in Madera, California.
These investments are in addition to other recent investments which will add overall 1,000tpd of new liquid oxygen and nitrogen capacity at Salt Lake City (Utah), Ghent (Kentucky), Longview and Freeport (Texas), to be on stream by early 2008. Air Liquide will also expand its liquid argon production and distribution capabilities by adding 200tpd of capacity in 2008.

Matheson Tri-Gas (TNSC subsidiary) announced in March that it was going to invest in expanding its bulk gases production capacity in the United States. Bill Kroll, Chairman and CEO stated, “The new air separation plants will be in southern California, the Midwest and central Texas, and we will continue to grow the infrastructure of our business in all our core markets.”

The company had previously announced that its first ASU in Vernon, CA had begun supplying bulk gases to the regional market.

New Hydrogen Projects
In accordance with the need for additional hydrogen capacity in refining applications, some of the major gas companies made further announcements this year about hydrogen projects.

Air Products will add new capacity to its Louisiana pipeline system by building a new hydrogen production facility in Garyville, La. The facility will supply the Garyville refinery operations of Marathon Petroleum Company and other customers located on its extensive Louisiana Hydrogen Pipeline Network. The 120 MMSCFD (c. 130,000 Nm3/hr) plant is projected to be on-stream in late 2009, in conjunction with Marathon’s major refinery expansion project.
“We are very pleased to be expanding our relationship with Marathon. This new facility will supply Marathon with both hydrogen and steam for its refinery operations. Hydrogen supply is critical to Marathon’s expansion project. Having our high-reliability steam methane reformer (SMR) on their site adds reliability by connecting to the largest hydrogen pipeline network in Louisiana,” said Tom Wendahl, Air Products’ Louisiana business manager.

Air Products has announced two further projects related to producing hydrogen. The first is Eastman Chemical’s petroleum coke-fed gasification project in the Gulf Coast, which will be one of the first major solid-fuel gasification facilities in the area. The company will market hydrogen to its Gulf Coast hydrogen supply pipeline network, and both construct and operate new air separation units to produce over 7,000tpd of oxygen, essential to the gasifier operation.

Then in September, Air Products announced another major ASU/H2 investment in California in which it will build 2 major ASUs (3,500tpd capacity). The resultant hydrogen will be used in a gas turbine to generate fuel, while surplus hydrogen will be pumped into its hydrogen grid.

Air Products’ newest hydrogen production facility in Port Arthur, Texas, came on-stream at the end of 2006 supplying Valero Energy Corp.’s Port Arthur Refinery and additional customers on its Gulf Coast hydrogen pipeline system.

Praxair finalized an agreement with Chevron to build a hydrogen facility at the Richmond Refinery in Contra Costa County, Ca., that is expected to be completed by fall of 2008. Praxair plans to build the facility to produce a capacity of 260 MMSCFD (c 280,000 Nm3/hr). The new facility will utilize technology from Lurgi (now an Air Liquide owned company), with Praxair also constructing a pipeline network to supply hydrogen to other refineries in the northern California area.

Praxair announced in 2006 that it had been awarded a long-term agreement with Pasadena Refining to provide hydrogen to its Pasadena, Texas, refinery starting in April 2007. The hydrogen will be supplied from Praxair’s existing 310-mile Gulf Coast hydrogen system.
Praxair’s hydrogen pipeline system, one of the largest in the world, is connected to a substantial portion of refining capacity on the U.S. Gulf Coast. Praxair’s Gulf Coast hydrogen supply capability will be approximately 700 MMSCFD (c 800,000 Nm3 per hour) upon start-up of new capacity.

Air Liquide started up a new hydrogen unit in Bayport, Texas, last year and it has been fully integrated into Air Liquide’s Texas Gulf Coast Pipeline system. The Bayport steam methane reformer (SMR) has a capacity of 100 MMSCFD (c 110,000 Nm3/hr) and is one of the main components of an expansion of Air Liquide’s hydrogen system on the Gulf Coast. A newly built purification station employing Air Liquide patented technology has been added in Freeport, Texas, and a 23-mile extension to the pipeline itself has been built between Bayport and Texas City, Texas.

Air Liquide is also building a new world-scale SMR in California. This unit, scheduled for completion in the third quarter of 2008, will supply hydrogen needs anticipated in the San Francisco Bay industrial basin.

Helium supply in the US remains a problem and is not only causing a North American supply issue but a global one as the US is the major supplier to the worldwide market.
ExxonMobil; have announced that its Wyoming Facility will go down for maintenance in October. This is on top of restricted supply from the BLM (Bureau of Land Management) pipeline system in the Texas Panhandle.
However, Matheson Tri-Gas may be able to provide a helium solution in the not too distant future.

Phil Kornbluth, executive vice president of Matheson Tri-Gas, comments, “Matheson Tri-Gas Global Helium manages the helium business worldwide for the TNSC Group. We are currently looking for a site in Southern California where we will construct a new helium transfill. This facility will supply the local market with bulk gaseous and liquid helium and coordinate expert logistics for shipments to Japan.”

Start-up for the site is planned in Q3 of 2008 and Kornbluth adds, “We also plan to purchase Linde’s Richmond, CA helium transfill prior to 15th September 2008, as required by the FTC’s Consent Order related to Linde’s acquisition of BOC. Although we are not at liberty to disclose the details at this time, Matheson Tri-Gas will also soon be announcing its participation in the development of a new helium source.”

CryoInfra Profile
CryoInfra, one of those companies currently enjoying a duopoly of the Mexican merchant market, was established in 1980 from a joint venture between Air Products and the Infra Group.

Since it was founded in 1919, the Infra Group has been pioneering oxygen production in Mexican industry and taking its latest technologies to the furthest reaches of the country.

Similarly, the CryoInfra joint venture company strives to provide continual improvements and fulfil all the expectations and necessities of its clients through a high quality service and product range.

The company produces and distributes industrial and medical gases for a variety of customers and currently operates 28 production plants located in key points of the national territory.