Glimpses through the Energy Crystal Ball : 2009

New Year's Eve Ball, 1978. Photo credit: The New York Times.

Happy New Year to our readers. Continuing the blogging traditions of forecasting major breakthroughs in a given field :-), I present my opinion of what the energy industry might expect in 2009.

• Oil prices & clean tech-investments: The downward trend in the crude oil prices will likely continue atleast until Summer'09. A lot depends on the market perceptions of US and world economies. The current conflict in the Middle East has put a slight upward pressure on the oil prices, but this will likely be temporary. Short-term clean tech-investments will depend to a major extent on the availability of credit and the risk perceptions associated with various technologies. Investments in oil sands production have come to a standstill because of the lower demand and poor credit access.


• Carbon trading and renewable energy credits: Because it might be easier to get Congressional approval on a renewable portfolio standard (RPS), expect RPS standards at the state/Federal levels to be implemented before a cap-and-trade regime. However, various regional GHG programs will begin to play a greater role in influencing the debate on a Federal cap-and-trade regime. I think that rewarding early action to reduce GHG emissions/increased renewable-based power generation should be a key component of the RPS/carbon trading approach.
  


• Clean coal technologies: The high capital costs associated with clean coal technologies (IGCC, CTL, etc.) coupled with the low cost of crude oil (and natural gas) have limited investments in clean coal technologies. One notable example is the cancellation of SES-Consol Energy synthetic gasoline project in West Virginia. However, CTL projects elsewhere in the world seem to be going forward. Because these multi-billion dollar facilities take many years to build, it is essential to take a long-term view for these projects. On the other hand, financing will still be partly influenced by short-term market trends, and well-established companies with proven technologies will stand a better chance at getting financed.
  Recently, Laurus Energy, the sole North American licensee for Ergo Exergy's εUCG^TM underground coal gasification technology received financing from a Silicon Valley-based VC firm. This indicates that projects which aim to lower capital costs of conventional coal technologies could also likely succeed in getting financed.
  


• Carbon capture and storage (CCS): Various players in the oil and gas industry and the power industry are following developments in the CCS field, and strategically positioning themselves. Exelon, for example, has a mid-term low carbon roadmap which incorporates elements of efficiency, along with low-carbon electricity production options such as natural gas, nuclear and renewables. Papers describing current industrial efforts in CCS from the recent Greenhouse Gas Technologies-9 conference can be found here. A comparative assessment of the World Resources Institute (WRI)'s CCS guidelines and emerging U.S./European geologic CO2 sequestration regulations is here (subscription might be required).


• Biofuels: My take on the short/medium-term implications of President-elect Obama's biofuel policy appeared as a guest post on The Big Biofuels Blog.

Conclusion: It would have been highly unlikely for someone to predict 40$/barrel crude prices at the beginning of previous year. The current economic slowdown will play a greater role in influencing both the consumption of energy and investments energy technologies. On the other hand, President-elect Obama plans to jumpstart the economy with a 850 billion $ infrastructure spending plan. The stakeholders must ensure that the current economic scenario is not another opportunity lost in addressing the problems of human development and sustainability.

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Synfuels (CTL, OTL, GTL, BTL, XTL) Round-Up

Given below is a compilation of the latest news, analyses and resources on synthetic fuels from hydrocarbons (coal-to-liquids, biomass-to-liquids, gas-to-liquids, oil sands-to-liquids)
Analyses

The Impacts of Synfuels (CTL,GTL, BTL, OTL) on World Petroleum Supply

RAND Study Concludes Oil Sands Synthetic Crude Can Be Cost-Competitive with Conventional Petroleum Even Over a Wide Range of CO2 Prices

New Life-Cycle Analysis Concludes Neither GTL or CTL a “Reasonable Path” for Energy Security With Reduced GHG Emissions

Study Suggests “Flexible Carbon to Liquid” Fuel Process Could Displace 15-20% of Transportation Fuels in the US

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

News

Australia:
Linc Energy Begins Producing GTL Liquids from Underground Gasification Syngas

South Africa:
Biofuels singled out as 'best option' for alternative fuels in SA

USA:
Synfuels Converts Natural Gas to Gasoline to Cash

New Route to Hydrocarbon Biofuels: A simple catalytic process converts plant sugars into gasoline, diesel, and jet fuel.

Synthesis Energy Systems Options Up to 15 Methanol-to-Gasoline Technology Licenses for Coal-to-Gasoline Projects

Researchers Propose Dual-Bed Configuration to Increase Efficiency and Reduce Emissions from Coal Gasification

China:
Shenhua Ningxia Coal Group boosts CTL project with Sasol

Is it the end of the line for coal-to-oil in China?

India:
Sasol mulls dlrs 8bn India CTL plant

UK:
Small Scale FT Contract with Thai National Oil Company

Resources:

Diesel Fuel from Bolivian Natural Gas by Fischer-Tropsch Synthesis using Nitrogen-rich Syngas

DOE Releases Feasibility Study for Small-Scale Conceptual Coal-to-Liquids Facility in Appalachian Basin : Technical and Economic Assessment of Small-Scale Fischer-Tropsch Liquids Facilities

An Engineering-Economic Analysis of Syngas Storage

Small-Scale Fischer-Tropsch

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

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.

Analysis:
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 CH_0.8) 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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Underground Coal Gasification: Keep the coal in the ground, convert it to gas

The world has much more coal than oil/natural gas. However, using coal also entails the disposal of mineral matter produced due to combustion/gasification. Additionally, for technologies such as coal-to-liquids (CTL), the captial cost of a gasification plant is very high. One technology that overcomes these two limitations is Underground Coal Gasification (UCG).
In UCG, the coal seam is gasified underground, by injecting either steam/hot air or a combination of both, converting the hydrocarbons to a syngas mixture, rich in inert gases. This mixture can then be further processed to remove the inert gases and produce synfuels. The highlights of UCG are NOx emissions which are comparable to combined cycle power plants, lesser ash volumes and lower capital costs. (See the GCC blog for results from a life cycle study on UCG compared to other "clean coal" technologies.) On the other hand, the operation of a UCG plant/reactor requires detailed knowledge of the stability/safety of the coal seam. Because the coal in the ground is being gasified, some subsidence will occur. Additionally, care must be taken to make sure that the ground water does not get contaminated by the organics produced during UCG. Accordingly, the UCG well should be located below the water table, and should be operated under negative pressure to ensure no leakage of fluids to the ground water. Additional details about UCG are given in the links below. By far, the best example of a UCG facility has been the Chinchilla project in Australia, which was the longest running demonstration project of its kind.

Update: I recently became aware of the Majuba project in South Africa (Thanks David!), which is supposedly more technically challenging than Chinchilla.

Whereas both the Majuba & Chinchilla projects converted/convert the gases from UCG into power, the gases could also be converted to synfuels. My opinions after the jump.
I am very interested in UCG, because this represents a unique combination of challenges in mine safety, mine engineering, coal gasification (fuel science) and potential CO2 sequestration. Moreover, when the ash content of the coal is too high (~30-40%), it may be economical to gasify it in-place instead of mining and gasifying it ex-situ. This is useful especially for Indian coals which have a higher ash content compared to most US coals. Therefore, a future CTL plant in India need not entirely be an above-ground structure. In fact, partial gasification to produce syngas and the conversion of this produced gas above ground to liquids might be cheaper. A phenomenon which is closely related to UCG is coal fires (UCF), which result from the burning of the coal seam. Examples are Centralia (PA), and fires in the Jharia coal seam. See Prof. Anupma Prakash's web page for more information on these phenomena.

Hat tip: Green Car Congress
Some links:
Best practices in UCG
Underground coal gasification: A new clean coal utilization technique for India
Primer on UCG

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Flue gas or Fuel ? : India's CTL Dilemma

India currently imports 72% of its crude oil consumption. It does have recoverable reserves of 50-71 billion tonnes of coal, currently primarily used for power generation. Here is a recent article on possible externalities from adopting coal to liquids (CTL) technologies in India. The authors (Ananth Chikkatur and Sunitha Dubey) underscore three issues surrounding the implementation of CTL technologies in India : the availability of coal, water requirements for CTL plants, and the emissions from CTL processes.

The article outlined three different proposals submitted by OIL, Tata-Sasol and Reliance. The OIL proposal is a direct liquefaction facility using low-ash, Assam coal, significantly lower in initial process investment (2.5 billion $) compared to Tata-Sasol and Reliance (8 billion $), which use high-ash coals. Both Tata-Sasol and Reliance proposals are expected to produce 80,000 barrels of liquids/day by consuming more than 30 million metric tonnes of coal/year. Accordingly, both Tata-Sasol and Reliance have ~1.4-1.6 billion tonnes of coal as their requirements (over the plant lifetime). This is 2-3 % of India's recoverable coal reserves. There is considerable resistance within the Indian government to open up coal for fuel production, mainly because Indian coal imports for power generation are projected to increase.

According to the article, the water requirements for CTL processes are around 12-14 barrels/barrel liquid fuel. Most of this is projected to come from ground water because of low supply of surface water in the areas where these CTL plants are planned to be sited. However, I think that this is less of a limiting factor, because coal can be transported relatively easily in trains. Therefore, the exact siting of the CTL facility may not be near the mining site itself, but where adequate water supplies are available. Additionally, because the direct liquefaction process uses hydrogen to cook coal to liquids, I would expect the water requirements for direct liquefaction process to be lower than the indirect liquefaction process.

The third challenge outlined in the article is the emissions from CTL plants. Being a believer in industrial ecology, I think that the emissions of H2S and VOCs can be used for fruitful purposes. For example: H2S can be captured and used as a source of sulphuric acid (H2SO4), which is an intermediate in the production of ammonium phosphate-based fertilizers. Therefore, I do not agree with all the points in the article. However, the article does raise valid questions regarding the CO2 emissions from CTL processes.

Summing up, the article does not advocate that India promote CTL plants in a normal business-as-usual scenario. On the other hand, I think that increased demand for coal (arising from CTL and power generation) will lead to improved coal mining technologies. I have been told that coal mines in India are relatively inefficient compared to their couterparts in the US. Why are such technologies not being put in place currently? There is no additional incentive for the coal mining company(ies) to invest because the profit margins on power generation will be small compared to the profit margins on CTL plants. Additionally, I think that high crude prices are here to stay. Therefore, I think a balanced approach, promoting energy conservation as well as cleaner, novel technologies are what India needs to develop sustainably.

More links below:
Is India ready for CTL fuels?
Articles on Indian coal from Ananth Chikkatur, on his website.

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