I’ve spent a day or two chasing after an assertion that “Coal To Liquids” was economical at present oil prices. Last I had looked into it, the economical point was about $70 / barrel of oil price. That itself was down from the $80 to $90 of prior years. Since oil has been running about $90 / bbl lately, all of those would seem to be “economical”, but oil companies like to make a big fat profit; not be just marginally hanging on. Then there is the fact that oil price can swing rapidly sometimes far into the low end. Just recently it had run down to about $70 on the economic recession.
The assertion I was chasing was that it had been economical since about 1994 and had stayed that way ever since.
Richard S. Courtney had made that assertion in a couple of comments. At Jonova’s and at WUWT which I’d seen.
A comment down near the bottom:
Richard S Courtney
November 26, 2010 at 8:52 pm
At #54 you ask (I think me):
The question is what would the comparative cost be to produce diesel & kerosene as opposed to traditional refining of crude? What comparative environmental costs are associated with surface or in ground gassification prior to liquefaction?
And on a different level:- If the costs are comparable or less, what does this mean for the geo-political balance of the world? (& big oil).
Wow! Those questions are far, far too big for an adequate answer here, but I will provide some responses.
The most important fact concerning these issues is the existence of the novel liquid solvent extraction (LSE) process. LSE has been capable of converting coal to synthetic crude oil (syncrude) at competitive cost to crude oil since 1994.
The LSE process was developed by the Coal Research Establishment (CRE) of British Coal (aka the National Coal Board: NCB). I worked on its development while at CRE and UNESCO commissioned a paper about it from me. We proved the process both technically and economically with a demonstration plant built and operated at Point Of Ayr in North Wales.
British Coal was owned by the UK government and ownership of the LSE process devolved to the government when the government abolished British Coal. There are good reasons why details of the LSE process are a state secret (see below), but the basic method is as follows.
LSE dissolves the coal in a solvent in an ebullating bed at high temperature and pressure. The solution includes hydrogen (obtained from coal and water by a ‘water gas shift’) that combines with the dissolved coal to form syncrude in the presence of a zeolite catalyst. The proportions of the various hydrocarbons (i.e. oil fractions) in the resulting syncrude are ‘tuned’ by adjusting the temperasture and pressure while the hydrogenation of dissolved coal occurs. Reducing the temperature and pressure causes the syncrude to come out of solution, and the solvent is returned to the start of the process for reuse.
The surprising economics of LSE are provided by its abilities to be tuned to provide syncrude that provides a match of refinery products which match market demand, and to consume sulphurous refinery bottoms.
An oil refinery separates crude oil into its component parts for sale. These components must match market demand: obtaining a correct amount of one fraction (e.g. kerosene) must not provide too little or too much of any other fraction (e.g. benzene). Disposal of an excess of a fraction has disposal cost and a shortage of a product causes market difficulties. This match to market demand is achieved by blending. Crude oils from different places has different proportions of components. So, an oil refinery obtains crude oils from different places, mixes them together such that the resulting blend consists of components that match market demand when they are separated by refining.
Blending has costs. Different crudes have to be obtained from different places then transported to the refinery and mixed in correct proportions. LSE product does not have these costs because the LSE process can be tuned to provide syncrude which has components that match market demand when they are separated by refining.
Crude oil contains sulphur that forms sulphurous ‘bottoms’ in the refinery process. Disposal of these ‘bottoms’ is expensive. But sulphur is removed from the syncrude during the LSE process and becomes part of a solid cake consisting mostly of ash minerals and some carbon (LSE converts more than 98% of the carbon in the coal to syncrude). The cake can be burned as fuel in a fluidised bed, and the sulphur then collected can be converted to saleable gypsum as a product. Hence, the oil refinery obtains no sulphurous ’bottoms’ when refining the syncrude.
The UK government owns the LSE process. But the UK produces little coal (because it closed its coal industry) and produces crude oil. Importantly, the UK produces Brent crude that has high value because it blends with Saudi crude (i.e. the cheapest crude). The required Saudi:Brent blend has approximate proportions of 2:1).
Use of the LSE process would collapse the value of Brent crude with resulting severe harm to the UK economy. So, details of the LSE process are a UK state secret.
However, the existence of the LSE process constrains the maximum price of crude oil. If the price were to rise sufficiently then the UK would benefit from release for use of the LSE technology.
In the future (at least 50 years and probably more than 100 years in the future), oil will become scarce if it continues to be used. In that circumstance crude oil supplies would become very expensive. The LSE product could be adopted as a replacement for crude oil. But the world will then be a very different place, so there is no purpose in considering what may/could/would then happen.
I hope this answer is sufficient.
The LSE process is a very good one, but not the only one, and there are others just about as good. One need not be constrained by the British Government and LSE ownership. I also note that Richard glosses over the ability of cat cracking and reforming to adjust to the kind of crude. In the USA, Valero in particular, put in many such units to be able to handle very heavy sour crude without ‘blending’. So blending is one method, but there are others in use as well. As Saudi “light sweet” runs out and they start selling more ‘heavy sour’ from their other wells, many refineries will need to add desulphurizing and cracking units.
Cut To The Chase
In the end, I found the answer in a paper that looks mostly like it is a plea for more R&D funding for an R&D organization. It seems mostly to be giving a laundry list of accomplishments, and one of them is coal to liquids. The price they assert is an eye opener. Realize this paper is from June 1996, so almost 17 years ago. Crude oil prices have moved on since then.
Coal liquefaction is not economically viable at current oil prices. However, economic modelling studies indicate that the LSE process is a lower cost route than competing technologies. Although a wide range of assumptions is necessary, it has the potential to be commercially viable at a crude oil price as low as $25/barrel in favourable circumstances. The abilities to process low-grade coals and to integrate with existing oil refinery operations give it a very large potential market, both in Europe and worldwide. By way of indication, a commercial scale plant processing 5 million tonnes/year of coal would meet only about 0.5% of current European transport fuel demand.
Similarly, substantial effort has been deployed in the research, development and demonstration of the British Gas/Lurgi slagging gasifier. The technology, which is based on the development of the conventional fixed-bed gasifier so that the coal ash is rejected as molten slag, is now commercially available. Whilst initially developed for the manufacture of SNG, it is considered particularly suitable also for use in Integrated Gasification Combined Cycle (IGCC) plant for power generation.
Yes, it has a lot of ‘weasel words’ around that price. So double it. Anyone think we are looking at $50 / bbl oil any time soon? Or triple it. How about $75 / bbl oil? Especially in Europe? You could make a case that the US shale oil and fracking will end up with US oil prices dropping. (We had been down to about $90 when Europe was still up at $120 due to there not being any export pipeline route to get the WTI over to Brent land…)
In other words, even if that price estimate is wildly wrong, it is now economical to convert coal to gasoline and Diesel fuels and has been for a while. One can only wonder if that is part of the reason oil companies and OPEC are funding some of the “Global Warming” scare. The process produces about twice as much CO2 per gallon of refined fuels. One of the few things that could keep commercialization of that coal source energy out of competition would be the CO2 released. (Anyone who thinks “Big Oil” is on the side of the skeptics has no clue about Big Oil.)
So for at least 15 years now the world has sat on a working technology for converting coal to oil products at economical prices. The LSE process is “owned” by the U.K. government who want to protect BP British Petroleum. While it has some advantages, there are a great many related processes that will not be significantly different in costs. It would not be hard to use them, instead.
This paper details them (as of about 2000 A.D.) and there are many.
The UK has that LSE process. Japan has their favored process, as do a couple of other countries. The USA has 3 or 4. (That is not counting the various companies that have proprietary variations on one of these, such as Rentech or Syntroleum). They have a major division into ‘direct’ v.s. ‘indirect’ liquefaction; then divide into many minor variations. For the “indirect” process, the coal is turned into ‘synthesis gas’ first, then catalytically reformed. That is, it is partly burned with water vapor to give CO and H2 gasses that are then combined into various chemicals. Depending on the catalysts and conditions, you can get anything from methanol to Dimethyl Ether (DME) to gasoline, Diesel, kerosene, waxes and greases. This is the process in production now in South Africa at Sasol and used by Rentech in the USA today to make fertilizers.
Direct liquifaction is not in production. That seems a bit odd after reading that paper since it is more efficient and has a lower price point. There are a variety of direct liquifaction process diagrams in the paper. They mostly differ in type of reactor (fixed bed, counter flow, fluidized, …) and the exact arrangement of various distillation and separation steps. Mostly the process consists of using an organic solvent (oils) with added high pressure hydrogen gas (often from a ‘water shift’ reaction like that coal gassification step above). Incoming coal is pulverized, mixed into that hot oil with hydrogen, and cooked in a reactor. That ‘stuff’ is then separated into gases (excess hydrogen being recycled to the start – hydrocarbon gasses to ‘product’), light organics (think gasoline to jet fuel and Diesel), and a heavy solvent (bunker fuel oil) that gets recycled to the start of the process to convert more coal. At the end of the process, there are a combination of atmospheric and / or vacuum distillation steps to make the various product streams. Exactly where you put the various reactors and distillation plus recycle streams makes up most of the differences in the processes.
After reading it all, to me it looks like they will have some variation in output product and costs, but ought not to be dramatically different. (That is, all of them ought to work and be ‘close’ in price. So $30 to $50 / bbl break even, not $100+.)
Which just leaves me wondering why we don’t see folks building these today. Yes, it has only been a few years since the economic chrisis. Yes, it’s been ‘trendy’ to believe in the evil Global Warming. But places like China and Russia have not been particularly shy about thumbing their noses at The West, while Japan has zero natural oil and a large chemical industry to feed. Even if just for the chemical feed stock I would have expected them to be doing something. (And, in fairness, they did do a lot of R&D and have their own ‘mix’ of the process.) To me, it looks like a mix of the low oil prices of the ’80s coupled with the Global Warming scare. As late as the ’90s we had cheap oil and low gasoline prices. ( I remember ‘under a buck’ a gallon in the 1990s and speculating that the gasoline was so cheap as they needed to make kerosene to excess for the “war machine” and the gasoline had to go somewhere….)
So I’d speculate that the “oughties” have just not been enough time for high oil prices to induce anyone to building.
That, BTW, is my major complaint about our governmental approach to all this. They just let oil price volatility drive our economy into boom / bust cycles and bleed $Billions to OPEC. It could be as simple as a ‘flexible tariff’ to fix it. Given those above cost points, that price would be about $80 / bbl. So we put up a tariff. POS( $80-$LandedPrice ) = Tariff. If the landed price is $70, the tariff is $10 (putting in place a price floor of $80). If the landed price is $100, the -$20 fails the test for positive value and the tariff is $zero. Doing nothing. So at any oil price under $80 / bbl, their is a stabilizing price floor of $80 that encourages domestic producers to stay in business. ( I would apply the tariff only to OPEC oil, as they are the only ‘swing producers’ who can damage the price floor and are themselves a price fixing cartel. This keeps Mexican and Canadian oil inside the tent…) At any price over $80 / bbl, the tariff costs nothing.
This price floor guarantee would assure that domestic producers of alternatives didn’t have to worry about OPEC crashing prices and bankrupting them. Yet, as oil has rarely been below $80/bbl lately, does not increase prices to the average consumer. (Which is likely why this plan will never be adopted. The “Green Nazis” will hate that it doesn’t discourage oil use, while the Political Masters will hate that they don’t get a bucket of tax money to spend. It only works for the citizens and producers…)
Back On CTL
I was a bit surprised at the overall efficiencies of some of the Coal To Liquids processes. Mostly I’ve looked at the ‘indirect’ ones that go through gassification. They can be a bit low on thermal efficiency but do work well for combined chemicals and fuels production. What surprised me was how efficient the ‘direct’ conversion could be. 60% to 70% conversion to liquids:
The total distillate product yield is in the range 60-65% (dry ash-free coal) most of which boils below 300 °C
Or further down on a “Lummus Crest Co-Processing” method (that converts coal and tar as from tar sands at the same time) we have:
The overall conversion of heavy material in the petroleum residue is 70-80%. The total net yield of distillable products is in the range 50-55% on fresh feed.
And the Alberta Research Council method:
The conversion of the coal depends primarily on the coal characteristics, but conversions of up to 98% on dry, ash-free coal can be obtained in some cases.
The amount of coal and tar sands in the world dwarfs the amount of oil. This effectively extends the availability of “oil products” for a couple of hundred years. (The limiting factor being coal mining for electricity generation as that uses far more coal; so will drive the consumption curve.) We are talking many Trillions of barrels of oil equivalent in tar sands alone. Coal more than that. (About 1/4 of the USA sits above coal deposits).
The only rational thing for a government “By The People” to do would be to start a steady construction of just such Coal To Liquids facilities. Much as building them in South Africa brought an end to supply disruptions there, it would act as a market stabilizing force. A discipline to OPEC manipulations.
(The oil bbl is 42 US Gallons or about 35 Imperial / 159 L so at $2 / gallon US you would have a $84 bbl. So a $1/gallon refining costs still leaves $42 for the ‘crude’ and that is well above the lower bound of cost listed above. As a ‘rough estimate’, prices at the pump should be lower than at present in the USA. Far lower than in Europe.)
That we are not doing it argues for exactly one thing. It argues for just how much our governments are in the pocket of large monied interests and uninterested in “We the People”. At the kinds of prices listed in these articles, we can manufacture gasoline and Diesel fuel for about $2 / gallon. Even with present gas taxes in the USA, that would be below $3 / gallon at the pump. Including profit for the industry along the way. Somebody is creaming off the price above that point, and that ‘someone’ does not want the price lower…