January 08, 2009

Anti-Peak Oil: Large Scale Liquified and Gasified Coal Competitive with Oilsand and Deepwater Oil

The large scale cost of getting a lot more oil is currently $200-400 billion to get each 100 billion bbl. 100 billion barrels is about a 14 year supply of oil for the United States. It is about a 3.5 year supply of oil for the world. The Oil industry's 2008 -pre-crash global exploration and development spending was $260 billion/year.

Recently there have been several major announcements in regards to coal liquification and coal gasification. Coal is getting cost competitive with oil from the oilsands and as way to produce more natural gas. Natural gas is already generated from coal.

Pro: is the scenario of the collapse of civilization because of peak oil would be avoided for some number of decades allowing more time for a transition to nuclear fission, nuclear fusion and renewable power
Con: It is still fossil fuel and while less polluting than solid coal they are still polluting (therefore deadly) and still a problem for climate change. Coal gas would potentially be four times or more better in terms of CO2/climate change.
Come up with something more profitable and better: There is big money (multi-billions) going down these paths. Alternatives have to be more profitable and better for the climate/with better for climate made more profitable with new energy policy like carbon taxes and cap/trade policies.

The energy winner and market share is about money, profit and the insatiable need for liquid energy to power the machines of civilization. Coal is providing affordable answers at the needed scale. Hopefully other tech can step up for a better environment etc... but these coal options appear to be getting to the right cost and scale to be the stopgap depending upon the timing of peak oil and the readiness of nuclear power and renewables at suitable cost and scale.

This site does not like that 3 million people die each year from fossil fuel pollution. This site would dislike the collapse of modern technological civilization even more as it would result in even more deaths.

1. South African company Sasol has a $10 billion project in Indonesia for the 80,000 barrel per day first stage, and then escalating to 1.1 million barrels per day of oil replacement from coal starting in 2015 (80,000 bpd in 2014-2015 and then escalating to 1.1 million bpd at an unknown point and cost). This price would be about 25% cheaper than prior smaller scale coal to liquid efforts.
- Kentucky is considering a substantial coal to liquid effort with nuclear power providing the energy. It would take longer (2025) and would be smaller but probably cost more. This cost difference is in the technology and because projects cost more in the USA versus countries like Indonesia and China.

$200-400 billion for CTL at the Indonesia/Sasol project price would be 2-4 million barrels per day. The duration and number of barrels depends upon the coal reserves at the location. The amount of global and country coal reserves is disputed. Indonesia could probably produce 60-120 billion bbl of oil replacement from its likely coal reserves. The process is competitive with $35/barrel oil.

Sasol will work with several local raw materials firms, including coal miner PT Bumi Resources Tbk., Jakarta, and state-owned oil firm PT Pertamina, to produce oil products from coal.

Initial output is projected at 80,000 b/d, eventually rising to 1 million b/d, according to the Department of Energy. Officials said the liquefaction plants will use low-priced lignite. "There will be no profitability problems so long as crude oil prices remain above $35/bbl." Indonesia has an estimated 36 billion tons of lignite or about 60% of the country's coal deposits.

Details on the new coal liquification processes

Prior projections (from 2006) of worldwide liquid coal from Newsweek are:

150,000 barrels a day today to 600,000 in 2020, and 1.8 million barrels a day in 2030

Will new Sasol deals and higher oil prices drive faster growth ?

Coal prices charted through 2008

2. Several companies are turning coal into gas underground by understanding and tuning the natural microbes that do this already. This appears on track to be scaled up to massive industrial scale. Gas in coal formations is already 10% of US natural gas and is expected to increase to 30-50% of annual US natural gas supply. Gas from coal is potentially as good environmentall as regular natural gas. The current US rate of natural gas usage could be extended by 10,000 years. Understanding how natural gas is formed in coal formations also allows for adjustment to the extraction process to not kill the valuable microbes making the coal into gas and extending the life of gas mines in coal formations.

Enhanced Oil Recovery
The economics favor Enhanced Oil Recovery (EOR) today, especially at a time when oil prices are at stratospheric levels -- as are oil and gas companies' operating costs.
Sandrea estimates that EOR could add reserves at a capital expenditure of $2-4/bbl, compared with about $4-6/bbl for deepwater development, almost $13/bbl for acquisitions, and more than $14/bbl for overall global finding and development costs.
He estimated that industry would need to spend $200-400 billion to improve the world's average recovery rate by a single percentage point to recover that incremental 100 billion bbl. That compares with industry's current global E&D
spending of $260 billion/year.
While deepwater and ultradeepwater exploration and development has garnered headlines with spectacular successes, Sandrea's study pointed to geological evidence that, to date, suggests the deep water is a play with limited prospectivity within a global offshore context

Multi-stage fracture oil mining is being used in oil wells outside the Bakken Formation where they have been used to multiply reserves by orders of magnitude. The multi-stage fracture mining could be used to get at a lot of the oil in abandoned wells in the US and other places. These processes and prospects will be reviewed in more detail in a separate article that will be available very soon.

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