Re: China, India can produce oil for less than $20 a barrel

From: Tequila (tequila_at_mockingbird.com)
Date: 07/19/04 

Date: Sun, 18 Jul 2004 23:27:10 -0500

This is good news.
Eventually, I hope that India/China will learn how
build the 'coal to liquids conversion' faclities by themselves.
Coal can also be coverted into methanol.
T.

habshi wrote:

> And since the money would be spent in the country it would
> create massive employment .
>
> excerpt asianage.com
>
> This would make its capital costs per ton of oil over ten times those
> of the SASOL-China plants. (The US Department of Energy has been
> involved with several "clean coal" projects of high cost and dubious
> merit, but that is another story.)
>
> Coal resources of 1 trillion tons are widely distributed around the
> world. Many countries, including China, India, Russia, Ukraine,
> Germany, Poland, South Africa, the US, and Australia have extensive
> coal deposits that would last 100 years or more at current rates of
> exploitation. However, coal is a highly polluting fuel when burned
> directly and also emits a lot of global-warming carbon dioxide
> emissions. 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 byproduct - and CO2 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 gasoline and diesel
> produced are high grade and clean, meeting even future "clean diesel"
> requirements of the US.
>
> The real question is if these plants can be built and reliably produce
> fuels for less than $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 publicized 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 $3 to $3.50 per million BTU. 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.
>
> This coal-to-liquids 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 sands. The heavy oil is then massaged into more
> valuable fuels. This source already accounts for a quarter of Canada’s
> 3.2 million barrels a day output but requires natural gas to heat the
> tar and is energy intensive, but still has production costs of under
> $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 sands 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. The progress of these efforts merits close attention.
>
> Is there a downside to rapidly adopting these technologies? Yes, from
> a global welfare perspective. Now, onshore oil production costs are
> usually under $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 $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 $20 a barrel, unless the price
> temporarily plunges below that level as it did in the late 1990’s. 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 from increasingly popular personal
> transportation. Higher efficiency standards in buildings and
> appliances are an alternative to politically difficult carbon taxes.
> In the longer term, fuel cells burning hydrogen and producing only
> water as a waste product are promising – but still far from economic
> feasibility. Even solar energy could become competitive soon in
> producing electricity.