Oct 13, 2008

The tale of two synthetic fuels & Using champagne to make beer

[Composition (atom %) of bituminous coal, Athabasca oil sands and Mexico heavy crude oil] (Using the link to view the image requires a stand alone SVG viewer and your browser needs to be configured to use this player)

I provide a brief description of two processes to produce synthetic fuels, coal-to-liquids (CTL) processes and synthetic crude oil (SCO) from tar/oil sands. The economics behind SCO and CTL production are briefly discussed. One of the critical factors influencing lifecycle CO2 emissions from and economics of the CTL and SCO processes is the C/H ratio of the original fuel source (tar sands/coal). The findings of a recent RAND report (Unconventional Fossil-Based Fuels Economic and Environmental Trade-Offs) are discussed from this perspective.

Overview of the process economics of SCO from oil sands:
Canada has the world's second largest reserves (179 billion barrels) of proven oil, of which >95% comprise oil sands. About 80% of Canada's oil sands deposits are too deep below the surface to use open-pit mining. These deep deposits have to be processed in situ using techniques such as steam-assisted gravity drainage (SAGD). The rest can be accessed via open-pit mining techniques.
Surface (open-pit) mining is a material-intensive operation, with 1.6 T of tar sands to be handled per barrel of SCO produced. The water requirements are also high. It is also fairly energy-intensive, consuming 1 barrel of natural gas equivalent of energy to produce 8 barrels of SCO. For both in situ as well as surface processes, the overall energy requirements (including mining, extraction, coking, and hydrotreating) are approximately 40-45 % of the calorific value of the syncrude. This heat is mainly supplied by natural gas. The price/unit of energy for crude oil is much higher than that for natural gas, and this price differential drives the economics of the process for extracting and upgrading the bitumen from tar/oil sands. During a conversation I had with a person working in underground coal gasification, it was mentioned that using natural gas to supply heat and steam for extracting bitumen from oil sands was similar to using champagne to make beer.

Overview of the CTL process:
A brief introduction to CTL technology is given in my earlier post on Indian CTL projects. CTL processes produce high quality synthetic liquid fuels (primarily diesel), using coal, oxygen and/or water as raw materials. The best example of a commercial CTL process is the one by Sasol, which produced 7.4 million T of synthetic fuels last year (approximately equivalent to 60 million barrels of oil equivalents, MMBOE). The CTL processes are characterized by high initial capital costs (1-3 billion $ for new plants), large scales (50-100,000 bbl/d plants), and high CO2 emissions. In fact, the Sasol Secunda facility is the largest single-point-source of CO2 emissions in the world. Both direct liquefaction (reacting coal with hydrogen or a hydrogen carrier) as well as indirect liquefaction (generating syngas followed by water-gas shift and Fischer-Tropsch reactions to produce liquid fuels) are possible. The choice is determined by the type of coal, ash content, water availability and other constraints.

The conclusions from the RAND report are given below:
  1. Basic production costs for SCO are likely to be cost-competitive with conventional petroleum fuels.
  2. While basic production costs for CTL also appear to be competitive with conventional petroleum fuels across a range of crude-oil prices, CTL competitiveness is more sensitive to technology costs and to oil prices.
  3. Higher oil prices or significant energy-security premiums increase the economic desirability of SCO and CTL.
  4. Even with future policy constraints on CO2 emissions and their associated costs, SCO seems likely to be cost-competitive with conventional petroleum; the main potential constraint on SCO production is its local and regional impacts.
  5. The cost-competitiveness of CTL is more dependent than that of SCO on the costs of CO2 emissions and CCS.
  6. Unconventional fossil fuels do not, in themselves, offer a path to greatly reduced CO2 emissions, though there are additional possibilities for limiting emissions.
  7. Relationships among the uncertainties surrounding oil prices, energy security, CCS costs, and CO2-control stringency have important policy and investment implications for CTL.
The C/H ratio of a particular fuel primarily determines the extent of CO2 emissions resulting from producing liquid fuels for transportation (with a generic formula CH2). As shown in the figure (data from "Synthetic Fuels" by Probstein & Hicks), fuels such as bituminous coal with a C/H atomic ratio of 1.2 (or an approximate molecular formula of CH0.8) will need more hydrogen to be added (or more carbon to be eliminated) to make liquid fuels (CH2) compared to heavy crude oil and bitumen (both having C/H ratios of ~0.7).

The disadvantage in extracting bitumen from the oil sands is that it does not flow very well and has to be hydro-treated (with H2) to make it more suitable for processing. As mentioned earlier, the higher CO2 emissions from SCO processes are due to the physical characteristics of the tar sands and not due to the C/H ratio of the raw fuel. This is why the RAND report mentions that SCO processes are likely to be competitive with conventional petroleum, especially in a high-oil price scenario. Moreover, the CO2 emissions from SCO processing is only 25% greater than that for conventional crude oil.

On the other hand, the CTL processes need to have higher quantities of hydrogen (or reject higher amounts of carbon as CO2 to make the hydrogen) compared to SCO and conventional crude oil. These higher emissions are the reason why the economic feasibility of CTL processes has a greater dependence on the costs for mitigating CO2 emissions, compared to SCO.

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