Denaturant pricing movement affects blend volume

By Ron Kotrba | February 05, 2008
With the leeway in ASTM D 4806-07 that allows ethanol denaturant to vary between 2 percent and 5 percent, producers gauge prices and adjust denaturant blend concentrations accordingly. Recent pricing in natural gas and ethanol markets have led to blending denaturant toward the minimum volume allowable.

In mid-January, Data Transmission Network ethanol analyst Rick Kment said there have been a lot of pricing moves in the denaturant market lately. With margins still narrow after modest ethanol pricing recoveries, ethanol producers can save "a couple of cents per gallon" by navigating up or down denaturant blend concentrations in their final product, depending on what benefits the bottom line. "At a time when margins are so thin, that could be the difference between making a profit or not," Kment said. For a 100 MMgy plant, a consistent savings of 2 cents per gallon could equate to $2 million over the course of a year.

Ethanol is denatured with natural gasoline to render the product undrinkable. Natural gasoline is a liquid hydrocarbon mixture from casinghead gas, which is natural gas obtained from the top (casinghead) of an oil well, as opposed to liquid natural gas from a natural gas well. The mixture largely consists of pentanes, which are saturated hydrocarbons with five carbon and 12 hydrogen atoms. "The denaturant market is a derivative of the natural gas market," Kment told EPM. "It's hard to find spot prices for natural gasoline, but it usually follows the [liquefied petroleum gas] price." Unlike ethanol prices, which trade on a per-gallon basis, natural gasoline is sold in million-therm units (a therm is 100,000 British thermal units). In mid-January, the natural gasoline price per one-million therms was slightly more than $8. "We're at the high end of where we have been recently," Kment said. "While in the second half of 2005 it was significantly higher than what it is today, in August 2007 the natural gasoline price dipped down to $5.46." Prices rose after that with a small dip in December 2007 but were back up to $8.17 at press time.

The ASTM maximum denaturant spec for ethanol recently changed from 4.76 percent on a volume basis to 5 percent.