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New Zealand has a stack of onshore oil and gas for the taking in the form of solid coal that could supply all of its fuel demands and more – no exploration, no drilling and no pumping.
Strapped for fuel during WW1 the Germans liquefied coal using the ‘Bergius’ process where it is mixed with hydrogen gas and heated. The Nazis between 1934 and the end of WW2, used a different CTL process to fuel their war machine. This process is known as ‘indirect CTL’ as it entails gasifying the coal at high pressure and temperature, then using the Fischer-Tropsch process to synthesize a liquid fuel (gasoline and diesel) from the syngas (a balanced purified mixture of CO and H2 gas). At its peak period in 1944, Germany produced about 125,000 barrels of synthetic fuel daily from 25 CTL plants. The Fischer-Tropsch method was adapted and perfected by South Africa between 1956 and 1960 as their answer to apartheid oil sanctions. Sasol, set up by the South African government as a CTL specialist company, produced its first coal oil in 1956 and, after a slow, expensive, painfull and often disasterous development stage, was producing petrol and disel in respectable quanities by the 1960s. Sasol has become the world authority on liquid-coal technology and the South African model is testiment that the technology works well – thanks to the country’s highly advanced CTL infrastructure, almost a third of South Africa’s transport energy needs are fuled on coal. In more recent years, Sasol has been employing its technology in Nigeria, Qatar, China (with two feasibility studies, each for a plant producing 80,000 bbl/d), and now Indonesia where it is considering plans to build a US$10 billion CTL plant. China, which is investing in CTL technology on a huge scale, is working on a different coals to liquid conversion process called ‘direct CTL’, which bypasses the gasification stage. The carbon problemBoth conversion processes release carbon dioxide, and much more than is normally released in the extraction and refinement of liquid fuel from fossil oil. While man-made Co2 is deemed to be a problem, future liquefaction projects will require intense sequestration, adding to what is already a complicated and expensive process. At the moment, there’s around 150,000 barrels of CTL oil produced around the world every day, but this could be up in the millions within a couple of decades as heavily industrialised nations such as China and the US push to wean themsleves from imported oil for security reasons. CTL development in the US is being led by the nation’s air force which is lobbying for the development of a military-industrial, privately-funded coal-based fuel industry (where the airforce buys the fuel at a price that guarantees a profit) that could jump-start a larger CTL development. The US Air Force has been qualifying its planes to fly on a mixture of synthetic fuels and aviation kerosene in recent years and hopes to fly its stateside missions on the combination by 2016. In 2007 the US Air Force defence think-tank ‘Rand Corp’ produced a detailed study on CTL using a hypothetical domestic production rate of three million barrels/day by 2030 from plants using bituminous coal. Tapping just 15 percent of known US coal reserves would yield roughly 100 billion barrels of liquid transportation fuels, enough to sustain three million barrels a day of CTL production for more than 90 years, it reckoned. Interestingly, the report did not consider C02 capture as an issue. “CTL plants already remove carbon dioxide from the synthesis gas, so capture simply involves dehydrating and compressing the carbon dioxide so that it is ready for pipeline transport,” the report commented. Almost full capture of plant-site carbon dioxide emissions would increase costs by less than US$5 per barrel, it reckoned, and adding biomass to coal feed (CBTL) would cut the CO2 footprint drastically. “Given information that is currently available and considering the entire fuel cycle, we conclude that CBTL fuels can be produced and used at greenhouse-gas emission levels that are well below those associated with the production and use of conventional petroleum fuels.” The Rand Report placed a cost of each project at over US$5 billion each, and the capital investment cost of a medium to large CTL plant to be between US$100,000 to US$125,000 per barrel of product. “Considering operating and coal costs, we estimate that for CTL fuels to be competitive, the selling price for crude oil (using a West Texas Intermediate benchmark) must be between US$55 and US$65 per barrel, including the costs of capturing about 90 percent of carbon dioxide emissions.” These estimates were also based on low-definition engineering designs and the first generation of CTL plants built in the US. “We expect the cost of building and operating new plants to drop significantly once early commercial plants begin production and experience-based learning is under way.” Prospects for CTL development in the US depends largely on the extent to which the federal government will provide incentives or disincentives for private investment in early commercial CTL production facilities, the report adds. “The greatest impediment appears to be uncertainty regarding the future course of world oil prices.” The Kiwi opportunityCTL technology is already touted as the ideal solution to our transportation and agricultural energy sector needs, using our generous reserves of lignite coal in Southland and Otago to supply the country with diesel, methanol and fertiliser. Solid Energy has already spent $60 million buying farmland over some of our estimated 11 billion tonnes of lignite deposits and company chief Don Elder publically advocates for the unlocking of the Otago/Southland lignite coal resource to power the country. He reportedly says we could become self-sufficient in diesel with a single coal-to-liquid-fuel gasification plant in Southland at a cost of about a dollar a litre. That “ballpark number” included production costs, government royalties and taxes, carbon capture and storage, and a return on capital. “I’m not saying that this will be the price at the pumps, but New Zealand potentially has access to diesel at a dollar a litre.” A single Fischer-Tropsch coal-to-liquid-fuels gasification plant atop one of Southland’s billion-tonne lignite fields could replace all New Zealand’s diesel imports within five years, he adds. Publicly listed company L&M Energy holds at least five lignite exploration permits covering 210 square kilometres, and has so far identified resources totalling two billion tonne. The company has been completing a feasibility study on a plant, likely to cost about $6 billion, that would be capable of burning five million tonne of lignite a year – equivalent to SE’s entire current annual coal production – to produce 50,000 tonnes a day of diesel. On the question of CTL production in New Zealand the Government has a non-committal view. Earlier this year, Energy Minister Gerry Brownlee said he supports the idea in principle and is fully aware of the potential of our lignite reserves, and says it will be “interesting” to see what comes out of Solid Energy’s scoping work on lignite to diesel. “Any developments of the lignite deposit will have to take into account environmental effects – most notably CO2 emissions.” No problem says Elder. The carbon dioxide by-product of the plant would be captured in the gasification process at a “trivial” cost and permanently sequestered deep underground in coal seams, saline aquifers or depleted oilfields, he says. Uunderground sequestration of gas has been a routine part of oil production for the past 30 years. All that the sequestration technology lacks is monitoring of its efficiency, and Solid Energy is contributing to research into this aspect at depleted oilfields in Australia’s Otway Basin. Elder reckons there are plenty of places in Southland where gas can be sequestered, and only their capacity was as yet uncertain.
Energy NZ Vol.4 No.4 July-August 2010 |
The technology and process of liquefying coal technology (coal-to-liquids, or CTL) is nothing new and has been around for almost 100 years.