Oil & Gas Journal (pg. 28)  [Printer-friendly version]
April 28, 2008

CTL DEEMED 'CREDIBLE' FUEL OPTION DESPITE DRAWBACKS

By Doris Leblond, OGJ Correspondent

Coal-to-liquids appears to be one of the more credible alternatives to
oil "for the long-term supply of transport fuels," said Institut
Francais du Petrole Pres. Olivier Appert, in a keynote address
concluding the World Coal-to-Liquids Conference in Paris Apr. 3-4.

IFP was a conference sponsor along with the World Energy Council, the
World Coal Institute, and the World CTL Association.

Appert was careful to mention, however, that while coal reserves are
huge compared to oil or natural gas, "it is clear that we need to
consider seriously the different constraints [on] coal production:
[the] environmental issue and technological and financial challenges."

The conference was convened to assess the possibilities of using
liquefied coal as a complement to road transport fuels because oil
prices are likely to remain high. Coal-rich countries China, the US,
Australia, Indonesia, India, and Germany are studying or preparing CTL
ventures, and South Africa and China are already engaged in industrial
production.

CTL drawbacks

The conference brought out draw-backs to CTL development, the greatest
being the need to combine it with capture and storage of carbon
dioxide, which the process emits. Producing diesel fuel from coal
generates 850 g/mile of CO2 compared with 500 g/mile from oil and
requires large quantities of water. Gasoline from coal also emits more
greenhouse gases than gasoline from oil.

Cost is another drawback. Based on the experience of South Africa's
Sasol, the cost of CTL was evaluated at $67-82/bbl, excluding the cost
of CO2 capture.

"It is cheaper than extraheavy oil production," said Alain Quignard,
who manages new projects and new motor fuel resources at IFP. He told
OGJ: "From coal onwards, one finds the refining processes applied to
heavy oil and deep conversion products."

Whether produced from direct liquefaction, with hydrogen added to the
organic structure of coal, or from indirect liquefaction through
breaking down the coal structure by gasification with steam,
investment in a CTL plant costs as much as a large refinery but
produces much less fuel volumes.

China's Shenshua CTL plant, due on stream this year in Inner Mongolia,
is a large complex having associated coal treatment and refining
operations. It will produce only 20,000 b/d of CTL but will cost
several billion dollars. Shenshua is using the direct liquefaction
process, while Sasol chose the indirect process.

Brian Ricketts, an International Energy Agency coal analyst, said the
liquid coal market would not exceed 15% of transport fuels before
2050. And if clean technologies are included, it would not be more
than 10% by then. However, use of the direct or indirect technology
would accelerate after 2020-30, he said.

Coal plentiful

At the conference Poland's former Prime Minister Jerzy Buzek, a member
of the European Parliament and vice-president of the European Energy
Forum, described his country as having the "largest coal reserves in
Europe." He said Poland is engaged "in resolving a coal conversion
dilemma: whether to use coal as power for electricity or only for
liquid fuels."

William Anderson, assistant secretary of the US Air Force for
installations, environment, and logistics, told the conference the
USAF is committed to synfuels development to reduce dependence on
foreign oil. Within the USAF's "energy initiatives," Anderson plans to
test certification of synfuels on the air fleet by 2011 and use a
synfuels blend by 2016 for half the fuels purchased.

Meanwhile, his department is developing "a major international
initiative" through ongoing talks with the UK's Royal Air Force and
France's Air Force about alternative aviation fuels, greenhouse gases,
and aviation fuel demand reduction. It also is "reaching to Air Forces
across the world; fuel needs to be international," he said.

Closing the conference, Appert gave his own cautious view, warning,
"In an uncertain environment, the industry needs to understand the
constraints of financing and engineering. But, as well, the finance
and engineering worlds have to understand and manage the specificities
of CTL.

"Given the size of CTL commercial plants, the needs for commodities
will be huge." He urged the industry to continue "studying and
improving CTL, [while] keeping our eyes open to other energy routes.
By doing so, I am convinced that CTL will be part of the solution to
the dramatic challenges of energy and environment the world is
facing."