December 31, 2005
Fischer-Tropsch Coal Gas Cost Effective With Current Oil Prices?

The Chinese are planning to start converting coal into liquid fuels.

ROYAL Dutch/Shell Group has handed in a feasibility study report on a coal-to-liquid project in China worth several billion dollars to compete with Sasol Ltd, the National Development and Reform Commission said.

The project involves the proposed building of two plants with a combined investment of US$6 billion to US$8 billion in Shaanxi Province and Ningxia Hui Autonomous Region, which represent areas with the most significant coal reserves in the country.

The estimated crude production capacities of the two plants are up to 80,000 barrels per day, or more than 1 percent of China's total oil consumption currently.

Shell is competing against South African company Sasol which currently makes 150,000 barrels of oil per day from coal.

The Governor of Montana wants to have Montana coal converted to synthetic gas and liquid fuel.

Gov. Brian Schweitzer believes Montana is sitting on the answer, and it’s in the form of the nation’s second largest coal reserve. Schweitzer wants the state to begin using an 80-year-old technology developed by Nazi Germany to turn Montana’s vast supplies of coal into usable, ultra-clean-burning diesel and aviation fuel.

...

With oil prices more than doubling the break-even point of producing synthetic fuels, oil companies and world leaders are beginning to take a serious look at the future of Fischer-Tropsch fuels. Schweitzer predicts they could be produced at a cost of about $1 per gallon in Montana if large-scale commercial plants could be developed in the state.

...

Closer to home, the Great Plains Synfuels Plant near Beulah, N.D., began operating in 1984 in response to the 1970s energy crisis and today produces more that 54 billion cubic feet of natural gas using the Fischer-Tropsch process.

“The Department of Energy was going to build hundreds of those plants but then oil prices dropped and we all forgot about it,” says Schweitzer, who visited the Beulah plant three weeks ago. “The cost of production [of syngas] at that plant last year was $3 per MCF (thousand cubic feet). Now the price of [natural gas] is $7 per MCF.”

Are Governor Schweitzer's numbers correct? What is the cost to convert coal to natural gas and then to liquid fuel with the Fischer-Tropsch process or some other process? Is synthetic gas (gaseous hydrocarbons - not gasoline) already cheaper than the current price of natural gas in the United States?

Three coal gasification plants are proposed in Illinois.

Three coal gasification plants currently are proposed in Illinois; only three are operating in the nation. A 260 megawatt gasification plant in Florida currently uses Illinois Basin coal. The state government, coal companies and even utilities have banded together to lobby for an Illinois siting of the federally-subsidized near-zero emission coal plant of the future known as FutureGen.

Planning for nine additional Gas-To-Liquid plants were underway in 2004 worldwide.

Synthesis gas can also be created from natural gas - and this is less costly than from coal. Since 1993, Shell in Malaysia (Bintulu) and PetroSA in South Africa (Mossel Bay) have been operating industrial Fischer-Tropsch Synthesis facilities, which produce liquid fuels from synthesis gas which comes originally from natural gas (Gas To Liquid, GTL). A third similar plant is being built by Sasol and Qatar Petroleum in Qatar in the Persian Gulf. Last year nine more GTL-facilities were being planned world-wide; most of them are to use Fischer-Tropsch Synthesis.

Both coal gasification and conversion of natural gas to liquid fuels are becoming more widely used.

Liquid fuel produced by the Fischer-Tropsch Gas-To-Liquids (GTL) process burns more cleanly than conventional fossil fuels and hence is less polluting.

Shell and ExxonMobil are ramping up production on a fuel, called Gas-to-Liquids, that's derived from natural gas. It significantly reduces the sulfur, carbon monoxide and other pollutants that belch from car tailpipes. And although more costly than regular gas, it should help crimp the air pollution in places like Los Angeles, or in New Delhi, where diesel buses are banned.

One impetus behind use of the Fischer-Tropsch GTL process is that natural gas is hard to transport. At the same time, the demand for liquid fuel is strong and prices are high. Shell has a plant in Borneo and is building another in Qatar to convert locally produced natural gas into a diesel-compatible fuel that burns much more cleanly than does diesel made from oil.

Note that natural gas gets used to generate electricity. If nuclear, wind, and solar generated all electricity then more natural gas would be available to make liquid fuel for transportation. There is already a lot of potential for substituteability of fuels even without development of better battery technologies.

Big politics and big money are also converging to support oil shale development.

Legislation recently signed by President Bush instructs the Interior Department to lease 35 percent of the federal government's oil shale lands within the next year, provides tax breaks to the industry,reduces the ability of states and local communities to influence where projects are located and compresses lengthy environmental assessments into a single analysis good for 10 years.

...

To produce the oil, Shell and other companies sink heaters half a mile into oil shale seams for up to four years, subjecting the rock to 700 degrees. Over time, natural gas and a liquid that can be refined into light crude oil rise to the surface. To prevent the brewing hydrocarbons from spoiling groundwater, the heated rock core would be surrounded by a 20-to-30-foot-thick impermeable ice wall, which also requires electricity to keep it frozen.

The federal government has begun leasing land for oil shale production. Ten new research and development leases are being processed by the Bureau of Land Management in Colorado. Others have been awarded on federal land in Utah and Wyoming.

See my previous post on Shell's effort to develop a better method to extract oil from oil shale. On coal gasification see a couple of Green Car Congress posts: "Rentech Moves on Its PolyGeneration Strategy: Fertilizer, FT Fuels and Power" and "Rentech Tracking to Startup Coal-to-Liquids Pilot Plant in Q4 2006". Also, Rentech makes the argument that synthetic liquid fuels made from natural gas (or coal gas for that matter) contain less contaminants that will mess up fuel cells than do liquid hydrocarbons made from oil. So when fuel cell technology matures that might increase the demand for synthetic liquid fuels even further.

Nuclear power could free up more fossil and biomass fuels to use as liquid fuel for ground transportation. This could be done a number of ways including the following:

  • Build a nuclear plant next to the Canadian tar sands and use nuclear energy to heat up the tar to extract oil from it. I think over half the energy extracted from the tar gets used to do the extraction. The planned Canadian natural gas pipeline will have part of its natural gas going toward tar oil extraction. That could be avoided with nuclear power. Then more oil could be made from the natural gas.
  • Build a nuclear power plant next to a coal field and run all the Fischer-Tropsch processing steps using nuclear power.
  • Build a nuclear plant next to the oil shale fields and use nuclear power to heat up the shale under ground using Shell's extraction process.
  • Use nuclear power for agricultural uses such as power water pumps and dry corn. Then biomass liquid fuel production would not use fossil fuels.

There's enough coal to provide liquid fuel for a long time to come even if part of the coal is used to generate energy to process other coal into natural gas and liquids. Ditto with oil shale and Canadian tar sands. But for making liquid fuels nuclear power could stretch the supplies of coal, oil shale, and oil tar (perhaps doubling or tripling the amount extractable as liquid fuel) and also reduce the total amount of polluting emissions generated by the production of liquid fuel.

My bigger point here is that even if the "Peak Oi" pessimists are right and oil production peaks sometime in the next 10 years that would not spell the end of the fossil fuels economy or the end of heavy reliance on cars and trucks. We will not enter a worldwide depression. The liquid hydrocarbon alternatives to oil are not prohibitively expensive. The quantities of capital needed to rapidly build up conversion plants would be available because the energy marketplace deals in sales in the hundreds of billions of dollars every year. Non-fossil fuel energy sources can even be used to help convert non-liquid hydrocarbons into liquid hydrocarbons.

Looking down the road a few decades I expect solar photovoltaics to become cheap as a result of nanotech advances. That might happen as early as 10 or 20 years from now. If Peak Oil comes early we can keep vehicles moving using liquid fuels made from coal and oil shale. Then we can transition to nuclear and solar to charge better batteries once battery technologies advance far enough to make pure electric vehicles possible.

I'd rather that the transition to nuclear, solar, and batteries happen sooner for environmental, national security, and economic reasons. But I'm not worried about Peak Oil if the transition away from oil comes as soon as the pessimists predict.

Update: I've come across a number of companies developing what they claim are better catalysts and other improvements on the Fischer-Tropsch process. For example, Syntroleum claims to have a better catalyst for Gas-To-Liquid conversion.

During the last two years at Syntroleum's 70 barrel per day gas-to-liquids (GTL) facility at the Port of Catoosa near Tulsa, Okla. Syntroleum utilized its proprietary FT-410 cobalt catalyst to successfully demonstrate the Syntroleum(R) Process by producing ultra-clean diesel and jet fuels from natural gas feedstock for various U.S. government programs.

This new testing program will demonstrate the effectiveness of the Syntroleum FT catalyst with proven coal-derived syngas clean-up and treatment processes for use in a coal-to-liquids (CTL) application. Syngas, which consists of hydrogen and carbon monoxide, is the building block for many chemical processes including FT ultra-clean fuels produced from the Syntroleum(R) Process.

"This testing program is an important step for Syntroleum in demonstrating that our proven natural gas-to-liquids technology is also applicable to coal-to-liquids as well," said Ken Roberts, senior vice president of business development for Syntroleum. "We see this as an opportunity to develop our position toward participation in future coal-to-liquids plants."

...

"Coal-to-liquids technology has the potential of providing a tremendous source of ultra-clean fuels from abundant coal reserves in the United States and other regions of the world," Roberts said. "The U.S. has the world's largest estimated recoverable coal reserves equaling over 268 billion tons. If only 5 percent of this coal were converted to FT liquids, it would be equivalent to the entire oil reserves currently held by the U.S.

I'd like to know what fraction of the energy extracted from coal makes it into liquid form. The process must require considerable amounts of energy at every step. Unless nuclear, solar, or wind power drove the conversion process liquids made from coal will effectively emit much more CO2 and other gases than petroleum used for the same end purposes. So a switch to coal would increase the greenhouse gas effect of fossil fuel usage.

Update II: Coal is not immune to price rises.

The demand for coal on the world market is up, according to The Associated Press. China has gone from being an exporter of coal to being an importer. Because demand is higher, the price is higher. Futures contracts for Western U.S. coal have gone from about $9 in June to $19.50 in October.

...

Coal is in demand because it produces energy at low cost. In July, electric companies could produce one megawatt-hour of electricity for $17 by burning coal. It cost $59 to produce the same energy with natural gas and $64 with liquid fuels such as kerosene, according to the AP.

But my guess is that higher prices will be transient since lots of coal mines can be opened up.

Share |      Randall Parker, 2005 December 31 10:45 PM  Energy Fossil Fuels


Comments
odograph said at January 1, 2006 5:53 AM:

Good morning! Happy New Year!

I'm a peak oil moderate, and am happy to see this list of (stuff)-to-oil action going on. It certainly helps tip the balance toward the optimistic side.

The rubber will meet the road of course as we do peak, and as we learn what our depletion rates are on the major fields.

We'll have to ask what capital investment is needed in CTL/GTL to match those oil depletion curves. IOW, building a few CTL, GTL, or nuke-tar-sands plants per decade might be perfectly doable, and affordable, but how many do we need? How much demand pressure will be building at the same time?

The risk I see (again, as a moderate) is that the "action" on this will trail the need, leading to more economic bumps (probably recessions rather than true depressions) than optimists might expect.

JMG said at January 1, 2006 8:36 AM:

FWIW, an off-hand comment from an acquaintance living near the Beulah, ND, area (they can see 7 power plant stacks from their house) about the coal gasification plant:

"You do not one anywhere near you. The pay is good at the plant but the workers have lung problems. The land around the plant is abandoned. People that live in that area have the highest incidence of asthma in the nation." Small particulate aerosols?

This transition will likely have its rough spots as unrecognized and unintended consequences emerge and the amelioration of external costs are debated in the political arena, fueled by the flows of large sums of money behind the scenes.

Randall Parker said at January 1, 2006 9:49 AM:

odograph,

The amount of capital available in the energy industry is immense. They could put up plants at the cost of tens or hundreds of billions of dollars per year if the profit was there to be made.

The questions in my mind:

1) At what price of natural gas is coal gasification cost competitive?

2) At what price of oil, natural gas, and coal gas is Gas-To-Liquid cost competitive?

Oil might be above those price points already and yet capitalists might be reluctant to make the investments due to the risk that the price of oil will fall. I do not know.

3) Also, how much will the costs of Coal-To-Gas (CTG) and Gas-To-Liquid (GTL) fall in future years?

JMG,

What I'd like to know:

4) How much pollution is getting released by the Beulah ND plant per ton of coal used and how does that compare to the amount of pollution released per ton of coal burned to make electricity?

5) How loose are the regulations on the Beulah plant as compared to new coal electric generator plants?

6) If CTG plants such as Beulah had tougher emissions regulations placed on them how much would that drive up their costs?

7) If coal electric plants had tougher emissions regulations, again, how much would that drive up costs?

I've previously posted estimates that if coal was made to be close to zero emissions then it would be almost double the cost of nuclear per kwh. But then the nuclear opponents will come back with claims that nuclear has huge liability costs that are not priced into the market price of nuclear electric.

I think the people who effectively are proponents of coal (most opponents of nuclear are effectively proponents of coal) list real and imagined costs of nuclear while failing to do the same for coal.

odograph said at January 1, 2006 11:28 AM:

I think what I was trying to get across was the difference between a technology on the shelf, and a thousand functioning X-to-oil plants. Or the old saw "what's the difference between theory and practice?"

"In theory there is none, in practice ..."

The rubber will meet the road when we learn, in practice, how the alternative energy development rate relates to the oil depletion rate.

And it's funny, becuase when we look at a "population" of players (producers and consumers) we have both early and late adopters. Some people will buy Priuses in 2006, and some will buy Hummers. IMO the geology of Peak Oil is well defined, and the alternative technologies are increasingly defined, but the societal response is up in the air.

odograph said at January 1, 2006 11:30 AM:

One could say "the societal and market response is up in the air."

For every Toyota there's a GM.

Randall Parker said at January 1, 2006 12:29 PM:

odograph,

As I see it CTG (Coal-To-Gas) or GTL (Gas-To-Liquid) are already doable. The Germans did them in WWII. The question is whether and when oil and natural gas will become so expensive to justify their use. Or will other technologies mature fast enough to prevent their widespread use?

I still want to know what today's costs are for CTG and GTL. Keep an eye out for better sources on costs.

odograph said at January 1, 2006 12:47 PM:

I absolutely get the idea that actual costs matter, but you know, maybe I can explain what I mean by "population response" by looking back at Toyota and GM. The future we got (Ford and GM in various states of trouble) came not from actual prices, but from those players inability to predict (or accept) them.

I saved a link from back in July '05 when a GM spokeswoman said something astonishing:

"Our indicators show that oil will go down, not up," she said, pointing to information she gets from the federal Energy Information Agency, which is part of the Department of Energy.

By 2010, the agency expects a barrel of oil to fall to $26, she said.

Now, I get that CTL and GTL will be driven by actual prices ... but will also be driven by who's believing the EIA's $26 estimates, yes?

Jim From The Energy Blog said at January 1, 2006 1:06 PM:

Good post. CTL & GTL have to be the major technologies that will enable us to have a sufficient supply of transportation fuels. GTL is more proven and is begining to be used more and more. Using natural gas to produce liquids seems to me to be the wrong way to go, our supply of natural gas is not that great and has better uses. You could argue that it is better than nothing.

CTL is not necessarily the cleanest technology, it could be cleaner but no one is going to put in cleaner plants than are required by law. Electric and fuel cell vehicles are not going to be sufficiently implemented for decades and we need something in the meantime. It takes such a long time to get a relatively new (Sassol has certainly proven the technology to me) technology proven to the point that major companies are going to invest massive amounts of their own money in building the required plants. I have been wondering for almost a year what was keeping CTL from being pursued more vigorously. I have concluded that the big oil companies are not convinced that the risk is low enough that the price of oil will remain high enough to insure that there ROI on building a CTL plant will be adequate. So,isn't it worth risking the money just to build a plant to demonstrate the technology to themselves. They would rather let the technology be demonstrated on a large scale in China where their risk is much less. They give the impression that tar sands and shale oil are less risk and more in tune with their other activities. Sassol seems more aggressive and is my bet that they will build the first large plant in the U.S.

Rentech, see my recent post, is being quite aggressive, but they are so small that they are not going to have much impact. Likewise for the DOE Gilberton CTL project. These projects might give the majors some incentive to do something. It is frustrating to see things moving so slowly. I don't think that government intervention would be of any use, the technology has already been proven, they would have to act as if it were an emergency and that isn't going to happen. As to Odographs question, I don't think that we could spend enough money to build enough plants in the next 20 years to keep oil prices under control. Stay tuned to see how things work out.

AA2 said at January 1, 2006 2:25 PM:

Happy new year all.

I got the peak oil book in 1997 by Colin Campbell I believe. I think it is true only for light sweet crude. Which the predictions seem accurate for, it probably has already peaked. But the heavy oils and unconventional oil has a long time left. Deep water wells, shale oil, tar sands, coal liquification, gas to liquid etc..

Invisible Scientist said at January 1, 2006 6:21 PM:

Even if the price of coal doubles due to increased demand, the United States probably still has enough coal for another century at much higher rates of consumption. Even if the coal-based liquid fuels were more expensive than oil, the facts must be analyzed by taking the foreign trade deficit into account. Energy is national security.

remo williams said at January 1, 2006 7:44 PM:

CAn you imagine the US or any other country burning much coal in 2050??

Invisible Scientist said at January 1, 2006 7:50 PM:

I mentioned the alternative energies to a financial analyst who knows a lot about oil, and he answered cynically that anyone who figures out a surprise technology to get rid of oil dependency, will die in a mysterious accident. The oil companies will make sure that until the last drop of oil is extracted, no other means are popularized. And after oil runs out, the oil companies will take over the coal mines to make petroleum from coal. This would certainly continue past 2050, because the nuclear plants will take a lot of time to build, and won't be built fast enough to meet the demand. The possibilities are one thing, politics is another...

Engineer-Poet said at January 2, 2006 9:50 AM:

There seem to be a lot of such "surprise" technologies floating around.  Direct-carbon fuel cells, zinc-air fuel cells, Li-ion batteries... those are the biggies.

Nobody is going to be able to suppress them by foul play.  Notice how all the conspiracy theories are US-centric?  Now consider the situation in Japan, Taiwan, or Israel where everything is imported.  Anything shoved under the rug here will pop up mushrooms there.  The only way to maintain control is to patent, which also means publicizing.

China's now selling a $10,000 electric car with NiMH batteries.  Roughly 90 miles range, which would at least triple if it was retrofitted with Li-ion.  The future is coming a lot faster than I expected, and neither the auto companies nor the oil companies are having much luck blocking it.

bigelow said at January 2, 2006 1:15 PM:

"Peak Oil" pessimists (as you say), and Peak Oil depletionist, is the difference between “Anti-abortionists” and Right-to-Lifers. It is all in the label.

We probably do not have one hundred years of U.S. coal left if we find so many more uses for it.

PEAK COAL (after Table 1 link below)

Results of Hubert Model and Three Supply/Demand Scenarios
Method----------Hubbert Model Scenario
-----------------------Energy Information Administration, Annual Energy Outlook 2004 Scenario
-------------------------------Flat gas consumption and greater coal consumption Scenario
----------------------------------------Flat gas consumption and synfuels from coal to replace oil Scenario
Peak Year-------2032---2060---2053----2035

The Peak in U.S. Coal Production
LNG Import Issues Key by Gregson Vaux
http://www.fromthewilderness.com/free/ww3/052504_coal_peak.html

“[Under the radar of almost every environmental and energy-study group, The Christian Science Monitor reported on Feb. 25, 2004, "At least 94 coal-fired electric power plants - with the capacity to power 62 million American homes - are now planned across 36 states." As FTW has long predicted, oil and gas shortages would inevitably lead the US into short-term, knee-jerk, reversion to coal and nuclear options as means to put proverbial fingers into the leaking energy dike.

Here, scientist Gregson Vaux presents an original study on US coal reserves which indicates that coal is likely behaving almost exactly like Peak Oil. If his analysis is correct, then coal may itself prove to be a short-lived and illusory solution. - MCR]”



Invisible Scientist said at January 2, 2006 4:14 PM:

Right now there is also a shortage of uranium, but according to some studies, there is enough uranim for several centuries if the uranium reserves were mined. The problem is that uranium mining was neglected for a long time. Also sea water has a lot of uranium that can be extracted by a slightly more expensive process.

Engineer-Poet said at January 2, 2006 9:51 PM:

Plus there is the possibility of both uranium and thorium breeder reactors (thorium is about 4x as prevalant as uranium, and it is much easier to breed fuel from it than U-238).

Hugh Angell said at January 3, 2006 9:02 AM:

Apparently the costs or the risk associated with large scale CTL production are still
prohibitive given that the oil majors or big coal outfits are not rushing to build the
plants.

Certainly a Chevron or Exxon would much prefer to buy coal reserves, build a plant in the
US and produce a cleaner and cheaper product than drill in 8000 feet of water off Angola
to acquire new reserves if it is profitable. To suggest that Exxon is partial to profits
from oil as opposed to profits from CTL is ridiculous. They want to make money period and
there is inherently less risk making your money in the US from American coal than relying
on a 'deal' with the government of Angola, Venezuela etc.

The Economist says that CTL is competive at an oil price of $40+ per barrel so right now
such plants would seem to be profitable. However the rub is that OPEC is not keen on losing
its biggest customers and the fact that as CTL plants come on line their very production
will undermine oil prices. Since the cost of producing a barrel of Saudi or Venezuelan oil
is very low there is a good deal of risk involved in the large scale production of CTL.

The US government can help here by mandating a minimum price for crude oil. By levying a
floating duty on imported crude so as to keep the US price at say $50/barrel no matter if
the world price sinks below that the risk of investing in CTL plants is removed. The higher
energy prices Americans might then have to pay, should world oil prices fall, would be
offset to some extent by the import levy collected on imported oil as well as reduce pressure
on the dollar and interest rates owing to our trade deficit.

So, if we use the Syntroleum CEO's figure of producing as much CTL fuel as current domestic
oil production ( just under 6 million b/d),we could reduce the global oil price, cut our
trade deficit by some $125 billion and make OPEC about as influential as the coffee cartel.
Since Europe already taxes motor fuels more than the US ( and whose to say they will not
also build CTL plants) our domestic price per gallon of fuel would likely still be less than
theirs so we should endure any competitive trade disadvantage. In fact, lowering global oil
prices would be of greatest benefit to the poorest nations on earth so a US CTL program can
be sold not only as energy security but as a way to help the poor.

Roy said at January 3, 2006 9:14 AM:

In lie of using nuclear power, is there any reason you couldn't use wind power as the means to heat the shale oil? That area of the country is pretty windy, and the intermittent nature of wind shouldn't matter much. Its not like the rock is going to cool down over a day of two with little to no wind.

Engineer-Poet said at January 3, 2006 10:31 AM:

There's a concept:  over-build wind capacity in the area, and use the shale heaters as the dump load.  It would be possible to get much greater effective capacity factor that way.

bigelow said at January 3, 2006 10:42 AM:

"...as CTL plants come on line their very production
will undermine oil prices."


Maybe not. With estimates of oil depletion rates for current producing wells from 2 to 8 percent per year, CTL oil replacement would have to exceed depletion and then some to lower the oil price; that --barring a world economic crash-- in the face of ever increasing demand too.

Jim from the Energy Blog said at January 3, 2006 12:21 PM:

Hugh, you arguments make a lot of sense, that is what has been puzzling me for the past year. As I said in my previous comment I think it must be the risk. One other factor is their profit margin, which is very high right now. Money is what drives most decisions in the corporate world. The coal companies don't have enough money, but the electric utility companies do. They have shown their willingness to take risk by building an IGCC plant, though it is partialy subsidized. The optimum configuration of a s when it is combined with an IGCC plant as is being done in Gilberton. Sassol, Shell and Bechtel are involvedl with that project. I think they want to see how that plant works out before moving ahead on their own.

Jim from the Energy Blog said at January 3, 2006 12:37 PM:

Hugh, you arguments make a lot of sense, that is what has been puzzling me for the past year. As I said in my previous comment I think it must be the risk. One other factor is their profit margin, which is very high right now. Money is what drives most decisions in the corporate world. The coal companies don't have enough money, but the electric utility companies do. They have shown their willingness to take risk by building an IGCC plant, though it is partialy subsidized. The optimum configuration of a CTL is when it is combined with an IGCC plant as is being done in Gilberton. Sassol, Shell and Bechtel are involvedl with that project. I think they want to see how that plant works out before moving ahead on their own.

On using wind for producing shale oil, that sounds like a pretty good idea, not the most efficient way of producing heat. The one I like is putting a SOFC fuel cell, running on natural gas, down the bore to do the heating using the waste heat to liquify the shale, then after the bore is warmed enough to produce some vapors, the vapors are used to power the fuel cell. Thus both electricity and oil are produced without any external power. Quite a bit of development required, a high risk project, but it might be worth a try. It doesn't solve the problem of contaimination of the ground water with oil-only the Shell project and mining the shale and using a retort do that, but those may be too expensive in the present economy. But someday we will have $100/bbl oil and electric cars and then they should be competitive.

jimcrack said at January 3, 2006 1:39 PM:

We should not be too optimistic about expanding coalmining as we replace oil. Current economies in the field rely on stripmining, not on deeper mines, or for that matter, in situ gasification (an old idea that Lenin endorsed, because it would spare workers the hazards of mining). My observations indicate that the coal utility industry in the US is a big porkbarrel: include the lignite generator in North Dakota (will never pay for itself since most of its operation produced natural gas at 4X the prevailing price) and the Jacksonville FL Clean Coal Facility (imagine barging coal from the midwest down the Mississipi all the way to the east coast of north Florida, where most of the emissions are blown out to sea anyway!)

The natural gas industry is in bigger trouble. According to the Wall Street Journal in 2002, we are sitting on up to 100 billion$$ in stranded pipeline and generator construction thanks to Enron-like planning. The best we can do is use gas transmisssion as a substitute for the electic grid, but this will promote district power schemes that are so antithetical to the conventional utility industry.

Be scared, very scared of what blurbs the coal and utility industries are putting out.

Hugh Angell said at January 3, 2006 2:21 PM:

JftEB,

Indeed, without US government backing I can imagine the hesitancy on the part of industry
to move ahead on CTL production. Then there is OPEC. Right now we are trying to coax the
Saudi's and others to expand their production capacity in order to give the world a supply
cushion. Pressing ahead in a big way with CTL plants would be seen as a hostile act by
Saudi Arabia et al. and who knows what action they might take in response. Some say that
OPEC drove the price of oil down in the 1980's precisely to undermine the US shale oil
enterprise then taking place. They might not be able to drive the price down today given
the supply vs. demand situation but they certainly could drive it up and or create physical
shortages.

Of some note was the US Senate refusal ( very close committee vote) to even make loan
guarantees available for CTL plants last November.

So again, without a clear greenlight from the US government, it does seem that CTL will not
be a major factor in our energy supply.

As to other Jim's complaint, yes there are some transportation constraints in rapidly
expanding coal use but is there some reason that CTL plants could not be built near the
mines themselves? If his complaint about white elephant gas pipelines is valid and it maybe
given the number of under utilized gas fired power plants in the US nowadays could they
not be used to transport coal slurry instead?

Randall Parker said at January 3, 2006 7:11 PM:

Bigelow,

A few points:

1) I'm not arguing for a shift from oil to coal, tar sands, and oil shale.

2) Yes, I agree they are all finite too. But charts on coal production are misleading. Coal's production rate has been affected by environmental regulations and prices of oil and natural gas. We just went thru a period where a much larger fraction of new electric plants burned natural gas. But we are shifting quickly toward more coal due to high natural gas prices.

3) My biggest point is that we aren't going to economically collapse when oil runs out. The human race's consumption of energy is going to continue to grow apace. It might get more expensive for a while. But not enough to stop economic growth.

4) But I want a better energy future than what inertia alone will take us toward. While I didn't make this point as strongly in this particular post I'd much rather we accelerated our transition toward what comes after fossil fuels. I do not want the pollution of fossil fuels.

5) Fossil fuels will eventually get phased out because the alternatives will drop in price far enough that people will prefer the alternatives. Then regulations on fossil fuel emissions will get much tougher. I do not see widespread support for tougher emissions regulations as long as those regulations greatly increase the price of energy. But make solar and nuclear really cheap and the public will support tough regs on fossil fuels.

Randall Parker said at January 3, 2006 8:20 PM:

Hugh Angell,

The Saudis no longer have the excessive production capacity to push the price of oil down.

Do you happen to have a link for where The Economist said that CTL is equivalent to $40 per barrel oil? I doubtt they said the resulting liquid itself would be $40 because the liquid coming out of CTL is basically already refined and burnable in diesel engines (and with lower emissions than diesel).

Roy,

I like the idea of using wind to generate electricity to heat shale. Yes, the heating probably does not have to be continuous. Though I wonder at the rate of heat dissipation. Some heat will be dissipated by the waiting between wind blowing times. Also, the Shell process requires refrigeration around the heated area if memory serves. Well, that makes a non-continuous power source even more problematic.

I like the idea of siting a nuclear plant on a shale field or tar sands field because some of the waste heat of the nuclear reactor could probably be used for heating the shale or tar sands. The stuff needs to get heated up quite a gradient. The initial ramp up the gradient in each area could use waste heat while the electricity would be getting used in another area to take the stuff up to an even higher temperature.

Aside: I've long wondered whether waste heat from nuclear reactors could be used to keep vegetable nurseries warm in the winter for vegetables grown in-doors.

Engineer-Poet said at January 3, 2006 9:50 PM:

IIRC, heat from conventional powerplants has been used to do exactly that.

Also gas from landfills.

Bigelow said at January 4, 2006 11:40 AM:

Randall Parker,

The human race rests on energy. Demand for energy continues to grow apace. Misleading coal charts and regulations are much less important than increasing demand for coal reserves spurred by liquid fuels substitutions, electrical production, heating and chemical feedstock needs.

Oil will never run out, it is a common misunderstanding; it is the rate of production which will plateau and then fall that is important. Coal to liquids and natural gas to liquids substitution is expected. Following supply/demand etc., all fossil fuel will get expensive --too expensive for most common uses like burning to power the world transportation system. People will prefer alternatives, if available.

Stephen Leeb wrote a book called the Oil Factor a few years ago. In the book he claims data supports the U.S. economy can absorb year over year increases in the price of oil up to 80% without provoking economic recessions, though greater increases are too big a shock. Economic ‘smooth landing’ from energy crisis depends on just four things: when we have reached oil peak, if alternative systems to oil are fully deployed, how much time there is in between and what harm we have done to each other in the meantime.

Paul Dietz said at January 10, 2006 9:48 AM:

Some comments on all this...

The Syngas plant in ND doesn't use Fischer-Tropsch; it uses the Sabatier process (nickel catalyst) to convert syngas to methane and CO2. BTW, the owners (a local utility group that bought the plant for pennies on the dollar after bankrupcty) are making money hand-over-fist with this plant right now, since the price of natural gas has become very high in the US. They also make money selling the CO2 to Canada for use in enhanced petroleum recovery, and also sell various organic chemicals (phenols, cresols) that are byproducts of the lignite gasification process. The plant has remained in operation since the original company went bankrupt, so even when fossil fuel prices were low the plant was making an operating profit (sorry about the capital cost, though).

Fischer-Tropsch diesel has the property of being very stable, so you can store it indefinitely in tanks. I understand conventional petroleum-based diesel has a finite lifespan due to gum formation (from polymerization of olefins, I imagine). FT diesel stockpiles might be a nice buffer against refinery failures.

Whether wind could heat shale oil fields depends on the cost of the heaters and power conditioning system, I think. You'd need to size the heaters for the (higher) peak heating load, since they will be on only a fraction of the time.

Gasification can be extended if you have an auxiliary heat source, such as nuclear, to provide high temperature steam, instead of diverting some of the fossil fuel's chemical energy to drive the reactions.

Andrew said at January 12, 2006 6:03 PM:

I'm not a CTL specialist, but have researched a fair bit in the area due to some interaction with my research area. Currently, the coal industry states that oil prices of over ~US$35/bbl make CTL economically viable. It appears that this corresponds to a break-even production cost of around US$18/bbl, but the risk factors and desire to make profit mean that a substantial higher oil price is necessary to convince people to invest. Sasol reportedly makes very good profits when the oil price exceeds US$25/bbl, but they already have a functioning plant that has lower capital risk.

Oil prices are significantly higher than this now, but there has only been minimal interest in CTL for a few reasons:
1) the scale of operation to be economic involves a very large capital outlay (ie. there are easier ways to make money)
2) it is difficult to produce/purchace sufficient catalyst for a large plant (current production is going into some big GTL plants)
3) some aspects of the technology are relatively unproven, so there is a significant risk of failure (while Sasol has been operating for a long time, their plant is extremely complex and the proposed new plants would attempt to reduce cost by eliminating some of the complexity and using 'better' technology to improve the bottom line)
4) the process is Greenhouse intensive, so has significant PR and legislative risk hurdles

While Sasol makes a large spectrum of products for their plant, the new plant proposals tend towards making diesel, naphtha (gasoline) and LPG. These are all essential sulfur-free and have very low poly-aromatic hydrocarbon (PAH) content. This makes them significantly cleaner fuels to use (eg. soot-free diesel).

Alan Njeru said at January 17, 2006 9:52 AM:

This looks like a checkers or chess game:

1. With all human creativity humans will not run out of hydrocarbons.

2. Advances in technology(ies) have brought down the costs of everything including transportation, deep water drilling, catalysis, costs of prodction etc. This is why the likes of Exxon can afford to go deep water anywhere.

3. CTL/ GTL has its own superior benefits including a wide range of feed stock, batch production of alcohols, paraffins - a wide spectrum of products- which increases economies of scale and reduces risk.

4. Depreciation of the US dollar due to Iraqi war may have actually made US investments more attractive. It has also resulted in an escalation of all commodity prices.

5. Can CTL compete with conventional oil at any price? If you are producing everything from Fischer tropsh wax to DME to alcohols in a single phase slurry reactor using syngas derived from all sorts of carbaceous material ( some of it with negative economic value like waste oil and tyres) then that FT process may be economically feasible.

Anthony said at February 1, 2006 11:53 AM:

The only way that alternatives to crude oil can be developed is if net oil importing countries set a minimum world market price for oil, say 40 USD per barrel. Oil and synthetic fuels from natural gas, coal, oil shale, garbage, and wood require this minimum to compete. Solar, wind and nuclear need similar guarantees. Oil producers dropped their prices in the 1980s and 1990s, sometimes to the low teens. It is highly likely that oil prices fall when complaints of high prices and talk of alternatives gets too loud. The mechanisms necessary for stopping producing countries from selling too cheaply would need to be varied and, hopefully, transparent. If importers stuck together, the threat of financial penalties against oil companies and oil equipment manufacturers could be sufficient. In an extreme case, the United States, possibly with NATO support, could physically delay the transit of oil tankers on the high seas.

Craig Capson said at February 7, 2006 10:13 AM:

As a member of a new start up company,I would like to let you know about a new Technology that has been athenticated by the University of Utah, Petroulem Eng Division. This tech is used in Oil Shale. It does not use the old retort tech. It use,s coal gasification to produce oil from shale, 18 thousand plus barrel,s per day and the bye product is clean elctricty, cement, co2 is traped and ligufied.Does not require refinery.Thus we do the cuts on site, diesel,jet fuel,heating oil,gas. Electrical 320 mega watts per day.Zero polution of ground water, in fact it is clean enough to drink.In some of the plants we will also use Fischer-Tropsch. We can produce all the Electrical need the western united states will need, with the green energy system that we have patented.This may not be the total answer to the world energy need but it goes along way to help bring the problem under control.We all need to coserve, from the top down.AMERICAN OIL PRODUCTION LLc. Salt Lake City, Utah. We think that we have solved the oil Shale extraction problem. Just getting funding is the next big hurdle. So many people are to scared to step up. Where is Mr Buffet,Branson, Kaiser,Gates,Huston we are calling you, but you dont answer.Billions of dollars just sitting there gathering rust and mold.

MARK FLOPPER said at February 17, 2006 5:56 PM:

In reading many of the various comments it strikes me that the processes for producing natural gas and hydrocarbon liquids using coal tend toward the resolution of more strategic problems. In 2005, the United States imported at least 12,000,000 barrels of oil per day at a price of about $55-$60 per barrel, equalling about $660,000,000.00 per day; roughly. If the country can produce enough hydrocarbon liquids to meet all or part of this need, then the money stays in the United States and not in the pockets of mostly Arab counties who really don't know how to use money all that effectively. Plus, by producing sufficient liquids to meet all of our domestic needs, the country solves a huge national security problem.

In fact, why not produce 30,000,000 barrels of oil per day and simply drive the price of oil down. This will put Russia, hostile Arab countries and Venezuela, to name a couple, in a pretty dire situation. Currently, these countries are reaping the benefits of the average American's ignorance and apathy. And maybe, with all this the country will be in a decidedly better financial condition. "America First" may be quaint and seem a little out-dated, but it just as true as it's ever been.

Why not turn the United States into the OPEC of the 21st century?

And finally, because the techology seems to produce low-emissions liquids, why not start a Kyoto Treaty II that requires all liquid hydrocarbons used worldwide to produce little or no sulphur? Turning the table on the enviro-monkies.

Thanks for all the input.

craig capson said at May 3, 2006 3:08 PM:

We have a new technology that has solved the problem of extraction of oil from oil shale. This is not a retort system, or in-situ,which is way to costly. Our process will produce 18,000 barrels of oil per day per plant plus 300 mega watts of electricty per hour per plant per day. All cuts of diesel,jet fuel, heating oil can be done on site. Water that is needed is the water in the shale it self. ALL CO2 IS SEQUESTERED and can be sent to old oil wells for injection to capture the oil that is left over. This is a green energy process. We are still working out some problems that come with new technology, but we will get it done. We are looking for monatary help as this is a start up. The production of oil cost comes out at $13.00 to $25.00 per barrel. And we know where the shale is. The company name is American Oil Productions LLC. IF you WISH TO REVIEW THIS TECHNOLOGY CONTACT CAN BE MADE AT BOBWEEKS@2COMCAST.NET Thank you.

Russ said at April 7, 2008 1:50 PM:

You know as I ponder all of this, I think it is about time that we Americans wake up. Right now and like it has been for a long time, America has been feeding the world (with our money and grain). Today we send our money/grain to nations that can not feed or defend themselves. I truly believe that there were several reasons why America went into Iraq. Certainly one was the oil. I would be the first to admit that going into Iraq was the right thing to do other than for the oil.

We are also over there because they want to come here and kill us. Not only are we having to fight for them, we also have to feed them. I think that the better way to fight them is to cut off the food supply. And that goes for all the OPEC nations. It would be mighty difficult for them to grow all the grain they needed in a dessert. Let’s see how they like the taste of oil.

To do this we need first to produce our own energy source. I am also convinced that corn is not the answer. Using corn to make gasoline just drives up the cost of everything that uses corn. From what I see here CTL and/or GTL needs to be put into action as soon as possible. And of course the cleanest energy would be the best choice. Right now I would settle on a technology that produces the same or less emissions that we have today.
Then a push needs to be on an alternative energy with no emissions for the future.

Ron said at September 17, 2008 11:00 PM:

A neighbor was involved with an oil-shale Union-76 pilot project in Colorado? Utah? in the 80's. The killer problem was that when they dug up the shale and retorted it, they ended up with "tailings" that were several times as bulky as the original shale. There was no way to get rid of it.

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