Coal-to-liquid solution for energy woes
The StraitsTimes ^ | July 19, 2004 | David Dapice
Posted on 07/20/2004 9:27:15 AM PDT by Baby Bear
AMID continuing violence in the Middle East, the issue of energy security is again on the front burner. With oil prices rising to a peak of US$40 (S$68) a barrel, countries have been looking at alternative energy with a greater urgency. This heightened sense of urgency, fortunately, has come at a time when there is evidence that a new approach using existing resources and technology can provide alternative energy to many countries.
A glimmer of good news recently appeared: China signed an agreement with Sasol, a South African energy and chemicals firm, to build two coal-to-liquid fuel plants in China. These plants, costing US$3 billion each, are reported by the Financial Times to jointly produce 60 million tonnes of liquid fuel (440 million barrels) a year. Since China imported 100 million tonnes of oil last year, these plants would give China much control over its domestic energy situation, though its demand is growing fast.
The raw material and capital costs of a barrel of fuel would fall under US$10 and other costs would not bring total costs over US$15.
Coal resources of one trillion tonnes are widely distributed around the world. Many countries, including China, India, Russia, Ukraine, Germany, Poland, South Africa, the United States and Australia have extensive coal deposits that would last 100 years or more at current rates of exploitation. But coal is a highly polluting fuel when burned directly and also emits a lot of global-warming carbon dioxide.
The Sasol technology, a third-generation Fischer-Tropsch process, was developed in Germany and used in World War II, and later in South Africa. (Steam and oxygen are passed over coke at high temperatures and pressures; hydrogen and carbon monoxide are produced and then reassembled into liquid fuels.)
It has long been too expensive to compete with standard crude oil. On the plus side, sulphur and other pollutants such as ash and mercury are removed - the sulphur can be sold as a by-product - and carbon dioxide is segregated and can be injected underground. If hydrogen is needed for fuel cells, these plants can also provide it. In the near term, the petrol and diesel produced are high grade and clean, meeting even future 'clean diesel' requirements of the United States.
The real question is if these plants can be built and reliably produce fuels for less than US$20 a barrel. Sasol already produces 150,000 barrels a day from coal. (Conversion from natural gas is cheaper and Sasol is in the process of switching its feedstock to gas in South Africa.) Each of the Chinese plants would be four times as large as the existing Sasol plant, and scaling up can involve difficulties. If Sasol can make these larger plants work at the publicised costs, this technology could be used by many other nations - rich and poor - who are willing to forego periods of very cheap oil for more security. (Indeed, even oil-producing Indonesia is looking into a coal-to-liquids plant as it now imports oil.)
This technology also works in converting coal to natural gas at a cost of US$3 to US$3.50 per million BTUs (British thermal units). Since current natural-gas prices in the US are roughly double that, it would appear that coal-to-gas is also an economically viable technology.
The coal-to-liquid technology would compete with the evolving tar-sands technology being expanded in Canada. This technology involves the production, either by mining or extracting with steam, of heavy oil trapped in sand. The heavy oil is then massaged into more valuable fuels. This source already accounts for a quarter of Canada's 3.2 million barrels per day output. It requires natural gas to heat the tar and is energy intensive, but still has production costs of under US$20 a barrel.
Tar-sand reserves are estimated at over 250 billion barrels. These and similar technologies would allow much more plentiful isolated natural-gas reserves, coal and tar sand to be converted into liquid fuels. The long-predicted decline in petroleum production could be delayed for decades or more, and the geopolitics of energy would be rewritten at something close to or below current crude-oil costs.
Is there a downside to rapidly adopting these technologies? Yes, from a global welfare perspective. Now, onshore oil-production costs are usually under US$5 a barrel. If prices are higher, somebody (the country owning the oil or the company producing it) gets the difference between the price and the cost. If we switch to US$15-$20 costs from these other technologies, then there is no surplus of price over cost, or a much smaller one. To use an economic phrase, the 'rent' on oil production is destroyed in a quest for self-sufficiency.
While true, the instability in oil prices - as well as the threat of terrorist disruptions to supply - are such that many nations might be happy to use their own resources to produce this vital input. They are no worse off if oil can be produced at US$20 a barrel, unless the price temporarily plunges below that level as it did in the late 1990s. A stable price and supply prevents very expensive disruptions.
None of this answers critics who are properly concerned with global warming. Subsidies to hybrid or other highly efficient vehicles are probably needed to reduce emissions. In the longer term, fuel cells burning hydrogen and producing only water as a waste product are promising, but still far from being economically feasible.
Overall, the coal-to-liquid technology is only one element of an integrated programme that is needed to deal with fuel security, local pollution and global-warming issues. But, even alone, it could bring an element of stability to world oil prices and thus also to the global economy. In addition, if it redirects efforts from geopolitical competition and even conflict to investment and efficiency, it is a welcome development.
The writer is an associate professor of economics at Tufts University. Rights: YaleGlobal Online, www.yaleglobal.yale.edu
Exit Polls: Bolivians Want to Export Gas (Latin America Leftist Alert!)
Yahoo News / Associated Press ^ | July 18, 2004 | DREW BENSON
Posted on 07/18/2004 7:33:04 PM PDT by EsclavoDeCristo
LA PAZ, Bolivia - The fate of Bolivia's immense natural gas reserves were at stake Sunday as voters decided whether to allow exports and increase government participation in a referendum aimed at healing social unrest threatening to fracture South America's poorest country.
Exit polls by television stations Unitel and ATB reported that between 56 to 63 percent of voters said gas should be exported. The issue is a sensitive one in Bolivia. Nine months ago, then-President Gonzalo Sanchez de Lozada was ousted for planning to export liquefied natural gas to Mexico and California. Clashes between highland Indians and security forces in and around La Paz left nearly 60 dead.
Although Indian leaders had threatened to burn down polling stations Sunday, there were only minor incidents of violence.
Police were investigating a dynamite explosion in the otherwise calm town of Achacachi, 40 miles northwest of La Paz.
Dozens of townspeople, including Indian women in felt bowler hats, sweaters and layered skirts, also threw rocks at a team of election observers from the Organization of American States. The team, part of 22 OAS observers sent to Bolivia, was trying to visit a polling station in the city of El Alto, a flash point of unrest in October.
President Carlos Mesa, formerly the vice president, offered to hold the referendum immediately after taking over to finish Sanchez de Lozada's term, scheduled to end in 2007.
"Whether people vote yes or no, this vote will win," he said. "We are creating peace today."
Valued at more than $70 billion, the gas fields in this landlocked country are the second largest on the continent, behind those in Venezuela.
Lured by privatization of the industry, some 20 foreign companies have invested $3.5 billion in exploration, discovering 55 trillion cubic feet of gas.
But some Bolivians remained wary of the vote and pledges that the exploitation of natural gas will raise incomes in a nation where two-thirds of the population live in poverty.
"I don't think this is going to improve the situation," said Patricia Mamani, a 28-year-old street vendor in the capital. "There have been so many promises, and the government always does what it wants."
The gas reserves have split the nation, with Indians in the western Andean plains pitted against the business elite in the eastern and southern lowlands, where the gas reserves are located.
The business leaders are set on exportation and have threatened to break away from the republic.
Indian leaders in the west want the entire gas industry nationalized to ensure profits stay in the country, an option Mesa left off the ballot.
"It's a trick," Indian leader Roberto de la Cruz said at a polling station in El Alto before voiding his ballot.
Despite opposition, Mesa has so far managed to hold the nation together as a straight-talking political outsider. But some fear Sunday's results could pull down the former television journalist's 70 percent approval ratings.
The ballot asked Bolivians if gas should be exported, if the government should recover ownership of all hydrocarbon reserves and re-establish the state-run oil company to work with multinational petroleum companies, and if Bolivia should use the gas to negotiate access to the pacific coast lost during Bolivia's 1879-84 war with Chile.
It also asked if a hydrocarbons law signed by Sanchez de Lozada that promoted the privatization and exploitation of Bolivia's gas and attracted foreign investment, should be repealed.
