coal-to-liquids: technology, commercialization, and ... this demand is to be met using crude oil, a...

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CoalCoal--toto--Liquids: Technology, Liquids: Technology, Commercialization, and Potential Commercialization, and Potential Contribution to US and Global Contribution to US and Global Energy PoolEnergy Pool

27th USAEE/IAEE North American ConferenceHouston, TexasSeptember 2007

Iraj Isaac Rahmim, Ph.D.E-MetaVenture, Inc.Houston, Texas

E-MetaVenture, Inc. 2

IntroductionIntroduction

Significant recent interest in non-petroleum-based sources of energy– GTL, CTL, BTL

CTL of particular interest in US, China, Russia, India, Australia,…– Governments, inter-governmental bodies, private sector,

environmental organizations– Sense that things are picking up in speed

Much of the technology is old but specific applications are considered– Require working-out various synergies and technical elements– Require careful evaluation of economics, environmental

implications, strategic impacts


Key TopicsKey Topics

CTL technology

Interested parties and drivers

CTL implementation status and projections

Likely impacts of CTL commercialization

CTL economics and the issue of CO2 recovery and sequestration


CTL BlocksCTL Blocks

Gasification involves pyrolysis, combustion, and gasification chemistries:2 C-H + 3/2 O2 2CO + H2O + HeatC-H + H2O CO + 1.5 H2

Also, some Water-Gas Shift: CO + H2O CO2 + H2

F-T converts SynGas to hydrocarbons:CO + ? H2 —CH2— + CO2 + H2O + Heat

(long chain)


CTL ProductsCTL ProductsProduct Upgrading can involve a number of activities:– Primarily hydrocracking of wax to lighter diesel and naphtha

Sample product slate for 50 MBD facility

High quality

High gradeLow volatilityLow pour point

High cetaneNear zero sulfur

Straight chain paraffinicNear zero sulfur

Similar to other plant (LNG, refinery) LPG

Comments

<15Wax

Low viscosityLow sulfur<115Lubes

Low densityLow aromatics3525Diesel

Preferred use: steam cracker feed139Naphtha

Can be co-processed and marketed with them21LPG

With HCNo HC


Interested PartiesInterested Parties


CTL DriversCTL Drivers

Large coal reserves exist with over 140 years remaining at current productionDemand for oil and natural gas is to continue rapid growthThe majority of coal reserves in the world are located outside the Middle East (e.g., US, Russia, China, India, Australia) resource security

The demand for transportation fuels, particularly diesel and other distillates, is projected to grow rapidly into the foreseeable futureIf this demand is to be met using crude oil, a significant “refinery gap” must be filled

Significant technological improvements in CTL components during the past two decades improved process economics


Driver: Energy and Product DemandDriver: Energy and Product DemandGlobal ReservesGlobal Reserves

213,000165,000191,000MTOE Basis(million tons oil equivalent)

8,5006,6007,600Energy Basis (quadrillion Btu)

1476341Years Remaining (at current production)

479 X 109 Tons6,405 TCF1,372 X 109 Bbl191 X 109 Tons

Proved Reserves

Coal(4 Grades)

Natural GasOil

(incl. CanadianOil Sands)

Resource

BP Statistical Survey or World Energy (2007)


Driver: Energy and Product DemandDriver: Energy and Product DemandGlobal Resource Demand ProjectionsGlobal Resource Demand Projections

© OECD/IEA, 2007, Key World Energy Statistics.


Driver: Resource Availability/StrategyDriver: Resource Availability/StrategyGlobal Distribution of Coal ResourcesGlobal Distribution of Coal ResourcesMillion Tons of Proved Reserves (2006)Million Tons of Proved Reserves (2006)

BP Statistical Survey of World Energy.

254,43228%

19,8932%

287,09532%

50,7556%

296,88932%

North America

S. & Cent. America

Europe & Eurasia

Africa & Middle East

Asia Pacific

246,643

157,010

114,500

92,445

78,500

USA

Russian Federation

China

India

Australia


Driver: Resource Availability/StrategyDriver: Resource Availability/StrategyDistribution of Coal ResourcesDistribution of Coal Resources——USAUSA

US Geological Survey Open-File Report OF 96-92.

Anthracite, Semi-Anthracite, Meta-Anthracite

Coking CoalMedium and High-Volatile Bituminous

Low-Volatile Bituminous Lignite

Sub-Bituminous


Driver: Energy and Product DemandDriver: Energy and Product DemandGlobal Distillate Demand ProjectionsGlobal Distillate Demand Projections

-

5 , 000

10 , 000

15 , 000

20 , 000

25 , 000

30 , 000

35 , 000

40 , 000

45 , 000

1977 1987 1995 2000 2005 2010 2015 2020

Mid

dle

Dis

tilla

te C

onsu

mpt

ion

(MB

D)

Projected Total at 3 %growth

Rest of World ( Excl FSU )

Asia Pacific

Europe

North America

“Refinery Gap”


Driver: TechnologyDriver: Technology

Individual CTL process elements have been around for many decades

Significant technical improvements during the past two decades:– Fischer-Tropsch– Hydroprocessing

Evolutionary advancements in gasification, gas treating, power generation,…

CO2 capture, compression, transportation, sequestration

Impact on Process

Economics

Environmental Concerns Later


CTL Facilities and ProjectsCTL Facilities and ProjectsExistingExisting

1955; Sasol technology5,600Sasolburg, South AfricaSasol I

1991; Gasoline and diesel; Sasol technology22,500Mossel Bay,

South AfricaPetro SA (formerly Mossgas)

1955/1980; Light olefins and gasoline; Sasol technology

124,000Secunda, South AfricaSasol II/III

CommentsSize (BPD)LocationCompany

Converted to GTL—using NG from Mozambique (circa 2004)?

A number of operational pilot plants. Examples: Rentech (15 BPD), Headwaters (30 BPD). Also two commercial GTL units operational.


CTL Facilities and ProjectsCTL Facilities and ProjectsIn the Works (USA)In the Works (USA)

3,60040,000FeasibilityLigniteNDNACC, GRE, FalkirkHeadwaters

N/A10,000-50,000FeasibilityBituminousAZHopi TribeHeadwaters

4,00035,000FeasibilitySub-bituminous, LigniteWellsvile, OHAMEC ParagonBaard Energy

8001,800Construction (2010)BituminousEast Dubuque, IL

Kiewit Energy Co., WorleyParsons

Rentech

N/A10,000-30,000FeasibilityBituminousSouthern IL, SW IN, Western KYN/ARentech/Peabody

N/A10,000-30,000FeasibilitySub-bituminous, LigniteMTN/ARentech/Peabody

6125,000DesignAnthracite CulmGilberton, PASasol, Shell, DOEWMPI

2,00020,000FeasibilityBituminousWVRentechMingo County

5,000-8,00080,000FeasibilitySub-bituminousCook Inlet, AKANTRL, CPCAIDEA

1,000-5,00022,000FeasibilitySub-bituminous, LigniteRoundtop, MT

Rentech, GE, Bull Mountain Land Co.

DKRW Advanced Fuels

1,40013,000Design (2011)BituminousMedicine Bow, WYRentech, GEDKRW

Advanced Fuels

5,000N/AFeasibilityLigniteAscension Parish, LAGE, Haldor-Topsoe, NACC, ExxonMobil

Synfuels, Inc.

N/A25,000FeasibilityBituminous, BiomassOakland, ILNone citedAmerican Clean

Coal Fuels

Cost (US$ million)Capacity (BPD)StatusFeedstockLocationProject PartnersProject Lead

DOE/Office of Fossil Energy—DOE/FE-0509, Green Car Congress


CTL Facilities and ProjectsCTL Facilities and ProjectsIn the Works (NonIn the Works (Non--US)US)——PartialPartial

70,000-80,000PlanningPRCHeadwaters/UK Race Investments

70,000-80,000PlanningPRCShell/Shenhua

80,000PlanningPRCSasol JV

40,000-180,000Construction?PRCYankuang

3,000-4,000Construction?PRCLu’an

20,000ConstructionOrdos City, Inner Mongolia, PRCShenhua

50,000PlanningPhilippinesHeadwaters

76,000Construction?IndonesiaPertamina/Accelon

60,000FeasibilityVictoria, AustraliaAnglo American (Monash), Shell

45,000FeasibilityAustraliaAlton Resources plc, Jacobs Consultancy, MineConsult

50,000PlanningNew ZealandL&M Group

Capacity (BPD)StatusLocationProject Lead

DOE/Office of Fossil Energy—DOE/FE-0509, Green Car Congress

Also, a number of related projects world-wide: gasification, CCS, direct coal-to-liquids, coal-to-chemicals,…


CTL Facilities and ProjectsCTL Facilities and ProjectsEIA Projection to 2030: Coal used in CTL (USA)EIA Projection to 2030: Coal used in CTL (USA)

As % Total Consumption:

2015: 1.2

2020: 1.9

2025: 5.2

2030: 6.3

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2004 2009 2014 2019 2024 2029Year

Proj

ecte

d U

S C

oal t

o C

TL (l

ong-

Tons

/Day

)


CTL Facilities and ProjectsCTL Facilities and ProjectsEIA Projection to 2030: Liquid Fuels from CTL (USA)EIA Projection to 2030: Liquid Fuels from CTL (USA)

As % Total Jet+DistillateConsumption:

2015: 1.3

2020: 1.9

2025: 5.6

2030: 6.2

0

100,000

200,000

300,000

400,000

500,000

600,000

2004 2009 2014 2019 2024 2029Year

Proj

ecte

d U

S Li

quid

Fue

ls fr

om C

TL (B

arre

ls/D

ay)


A Word on GTL Diesel Supply A Word on GTL Diesel Supply ProjectionsProjections

A large number of potential projects; only a small fraction likely to be built

Qatar: self-described GTL capital– Oryx I: 2006 start up; March 2007 upgrader on line, May 2007 1st product lift– Shell Pearl: 2009 (cost issues: $18 billion)– ExxonMobil: 2011 (canceled Feb. 2007)– Marathon, ConcoPhillips on hold per Qatar government temporary moratorium—

likely to hold at least until 2009

Nigeria: – Escravos (Sasol/Chevron): under construction (delays and cost increase)

California Energy Commission estimate (early 2000s):– 2010: 75 MBD global GTL diesel capacity– 2015: 388 MBD– 2020: 800 MBD

Sasol Chevron estimate: 600 MBD by 2016-2019


More on CTL Diesel ProjectionsMore on CTL Diesel ProjectionsGlobalGlobal

US (Baker and O’Brien study):– 2017-2022: 4-6 large-scale (>40 MBD) CTL in Western US– Some smaller plants under consideration in the Eastern US

Potential: 250 MBD of middle distillates

PRC :– A number of projects under study/planning/construction

Example: 20 MBD plant in Inner Mongolia– CTL considered a key component of the PRCs overall, long-term energy strategy– A new key issue: recent environmental concerns of the PRC government– Projected (Robinson and Tatterson, OGJ Feb 2007 study): as much as 160 MBD

liquid fuels

Others: various projects under study/planning

2020 Hand-waving estimate (global): 300-500 MBD2030: 600-1,000 MBD—many unknown factors


What Impact will CTL have onWhat Impact will CTL have on……

Coal market? Proved reserves, production, production increase capability

Liquid fuels market? Supply/demand, change in other sources– Diesel– Jet– Naphtha (for cracking or blending)

US v. worldwideRegional markets

A word on specialty products: lubes and waxes

Environmental impact

Some factors affecting CTL growth:

- Petroleum prices

-Capital availability

- E&C resources

- Technology

- Movement on CCS

- Incentives and regulations


Policy Action (1)Policy Action (1)Regulations and IncentivesRegulations and Incentives——Key FactorKey Factor

Multiple forms of incentives under consideration (or in effect) in various jurisdictions. Include:

– Direct subsidies or price guaranteesExample: 2005 Federal Transportation Bill—$0.50/gallon of FT naphtha and diesel.

– Loan guaranteesExample: EPAct 2005—loan guarantees for gasification projects with < 65% output as electricity.

– Investment tax creditEPAct 2005—20% credit applied to first $650MM investment during first year of operation


Policy Action (2)Policy Action (2)Regulations and IncentivesRegulations and Incentives——Key FactorKey Factor

Other incentives:

– USAF Synthetic Fuel Initiative: successfully tested 50/50 SyntroleumFT fuel; targeting 50% synfuel use (domestic) by 2016; awarded 7,500 Bbl FT jet fuel for 2007.

– Government funding of R&D and demonstration units

Environmental regulations/incentives: – Multiple on emissions from plant and fuel– Multiple on fuel quality– EU: Emissions Trading Scheme– Voluntary emissions trading markets (e.g., Chicago Climate Exchange)– US State initiatives (e.g., California, several NE States)

In flux. Subject to lobbying by interest groups on all sides.


Typical Overall CTL BalanceTypical Overall CTL BalanceTwo Recent StudiesTwo Recent Studies

* NETL study for DOD/Air Force (August 2007)** NETL/DOE study (April 2007)*** Not verified. Does not include all energy recovered in process.

1.321.23Ton CO2/Ton Coal47***51***Overall Thermal Efficiency—% HHV

0.570.53Ton CO2/Ton Coal (carbon/carbon)2.042.25Bbl Liquid/Ton Coal

Other products: S, slag, fuel gas,…124.39.7Net Power—MW 32,4816,035CO2—TPD22,1733,509Naphtha—BPD27,8197,500Diesel—BPD

Other feeds: air, water, …24,5334,891Coal (Illinois #6, bituminous)—TPD

50,000 BPD**11,000 BPD*Total Liquid Product Capacity


Typical CTL EconomicsTypical CTL Economics50,000 BPD50,000 BPD**

$ 210 MMProduct Upgrading

$ 255 MMPower Generation

$ 425 MMOther

$ 4,250 MMTIC

$ 510 MMWGS + FT

$ 850 MMSynGas Clean-Up

$ 425 MMAir Separation Unit

$ 1,150 MMGasification

$ 425 MMCoal and Slurry Prep

CAPITAL COST**

$ 510 MMTOC

$ 300 MMPurchased Feed

$ -20 MMVariable (net)

$ 230 MMFixed

OPERATING COST*(annual, 1st year basis)

• * One scenario. For discussion purposes only. Results depend on a number of variables and parameters including: product prices, plant availability, EPC cost, % debt financing,…

** Excludes CO2 compression, transportation, sequestration costs.

6 yearsSimple Payout

16.8 %ROI

67%

12%

5%

16%


Driver: Environmental Concerns (1)Driver: Environmental Concerns (1)

As we go from lighter hydrocarbon resources (Natural Gas) to heavier (Crude Oils) to heaviest (Coal)– C/H increases– More CO2 made during conversion to useable fuels

KEY POINT: every single coal carbon molecule, when converted to fuel, will eventually end up in CO2– Question is NOT whether we make CO2

– Rather, it IS where we make CO2 and what we do with it– (Same applies to natural gas and crude oil)

Key: Capture, Compress, Transport (pipeline), Sequester (“CCS”)– Multiple sequestration options under consideration


Driver: Environmental Concerns (2)Driver: Environmental Concerns (2)

Concern: All agree that CCS is necessary for CTL but major parties do not incorporate the cost of CCS in their economics

Concern: Though CTL+CCS compare well with oil refining in terms of CO2 emissions, there are other options (e.g., BTL, nuclear, wind) with significantly lower CO2 emissions

(Concern: Some sequestration options are technically unproven or risky)


COCO22 from CTLfrom CTL

Given production of a typical 0.65 ton CO2 per Bbl of liquid products– 50,000 BPD plant: 11.3 million tons CO2/year

Question: – Is this significant? – How important is it to capture, compress, transport,

and sequester (CCS)?


Worldwide Large Stationary COWorldwide Large Stationary CO22 SourcesSources

91303Bioethanol and Bioenergy

13,4667,887TOTAL

3390Other Fossil Fuels

50Not AvailableOil and Gas Processing

379470Petrochemicals Industry

646269Iron and Steel Industry

798638Refineries

9321,175Cement Production

10,5394,942Power

Emissions(million tons CO2/year)

Number of SourcesProcess

Intergovernmental Panel on Climate Change (2005)


COCO22 Emission Projections from CTLEmission Projections from CTL

Typical CCS in the context of CTL: 80-90% CO2 emission reduction– Recovers as much as 95% of the CO2– However, CCS uses energy lower net reduction

CTL with no CCS: emissions worse than refineries, better than coal-fired power plantsCTL with CCS: emissions on par with refineries

Consider earlier EIA US CTL projections:

0.1-0.31.3-1.72030 CTL Emissions as % 2005 Global Stationary Sources

17-46175-23020303-1228-6120201-810-412015

with CCSwithout CCSProjected Emissions from CTL(million tons CO2/years)


COCO22 Capture, Compression, Transport, Capture, Compression, Transport, Sequestration (CCS) (1)Sequestration (CCS) (1)

Capture includes separation/concentration, treating (e.g., dehydration), etc.– Mature technology used extensively in gas plants and refineries

worldwide

Compression: to pressure acceptable to pipeline

Transport—a number of factors– Distance– Tons per year– <1000 km + >millions of tons per year: pipeline most economical– >1000 km + <millions of tons per year: tankers– Mature technology (e.g., >2,500 km pipelines transporting > 40 million

tons of CO2 per year in the US


COCO22 Capture, Compression, Transport, Capture, Compression, Transport, Sequestration (CCS) (2)Sequestration (CCS) (2)

Sequestration can involve– Use in enhanced oil recovery (EOR)

Example: currently, in US, 30 millions tons per year CO2 is injected for EOR applications

– Injection in depleted oil/gas fields or other suitable geologic formationsMost likely option (largest capacity, location, stability/leak)Current example: 1 million tons per year CO2 from Sleipner gas field is injected into saline aquifer under North Sea

– Ocean storageIn R&D; Technical issues

– Conversion to inorganic carbonates or direct industrial useSmall

In essence: every one of the elements in the CCS chain is tested/run-commercially. However, not all together in one chain.

– Very active area: R&D as well as commercial testing– Very high likelihood of technical success– QUESTION: impact on economics?


Economics of CTL + CCSEconomics of CTL + CCSCCS economics vary wildly, depending on factors such as capture process specifics, pipeline length, injection reservoir type and depth, etc.

One study (IPCC 2005) (incl. amortized add’l capital):– Capture from power plant: $15-75/ton CO2– Transport (250 km): $1-8– Geological storage (excl. remediation/liability): $0.5-8

Another study (MIT 2007):– Capture/compression: $25/ton CO2– Transportation/storage: $5

A third study (Australia 2006) (capital cost for 0.5 million TPY CO2, equiv. to approx. 2,200 BPD with 50 km pipeline):

– Capture: $25 MM– Compression: $8 MM– Pipeline: $15 MM– Sequestration: $3 MM– Net operating cost: $24/ton CO2 captured (incl. amortized capital)


Rough CTL+CCS EconomicsRough CTL+CCS Economics50,000 BPD*50,000 BPD*

Consider 50,000 BPD CTL

Addition of CCS (incl. 50 km pipeline): – $300 MM extra to TIC– Or $230 MM/year to operating costs (including amortized

TIC addition)

6 years

16.8 %

CTL

9 years

11.3 %

CTL+CCSCase

Simple Payout

ROI

* One scenario. For discussion purposes only. Results depend on a number of variables and parameters.


SummarySummary

Significant new interest in CTL

Many parties—pro and con—in a number of countries– Energy security and strategy, environmental impact, product quality

Mature technology; many variable affecting economics

Large number of projects—mostly in study; a few in design or construction

Projection for CTL diesel suggests 1-2% of demand by 2020, 6-7% by 2030

Capital intensive but multiple studies show potential for reasonable economics

Environmental impact key—CO2 capture, compression, transmission, sequestration


Contact InformationContact Information

Iraj Isaac Rahmim, PhDE-MetaVenture, Inc.P. O. Box 271522Houston, Texas 77277-1522USATelephone: USA (713) 446-8867Email: [email protected]

coal-to-liquids: technology, commercialization, and ... this demand is to be met using crude oil, a...

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