Electric Power 2009, Chicago, USA Pre-Conference Workshop EP09 PC8: Resurgence of Coal to Liquid and Gas - Current Status and Future Development An Update on the Global Markets for Coal-to-Liquids Technologies Dr Andrew W. Cox Energy Intelligence & Marketing Research 192 Sandyford Road, Newcastle upon Tyne NE2 1RN UNITED KINGDOM. Tel: 44-191-261 5274 [email_address]
As part of the Electric Power 2007 conference, a pre-conference workshop containing a panel of distinguished speakers examined the future of coal liquefaction / coal-to-liquids [CTL] technologies. After two years it is appropriate to re-examine this topic and produce a progress report on the global developments and the outlook for the future.
CTL technologies have a long and distinguished pedigree – being initially developed in Europe during the first three decades of the Twentieth Century.
A wide spectrum of liquid fuels and other chemicals can be produced from coal - but these processes became uneconomic in the post-World War II era when large volumes of cheap crude oil from the Middle East and other oil producing countries entered the marketplace. Since then commercial interest in CTL has been sporadic and marginal in nature [primarily driven by energy security concerns and hikes in the price of crude oil].
The increase in the price of crude oil between 2005 and 2008 led to a new surge of interest and commercial activity. However, the collapse in the oil price between Summer 2008 and early 2009 – falling from US$147/barrel to below US$40/barrel caused many CTL projects to be abandoned or postponed.
In spite of this setback, the outlook for CTL in several parts of the world remains positive – with major production facilities undergoing construction and commissioning in China.
The inevitable recovery in global oil demand - as well as the peak production of light sweet crude oil in the next few years - will lead to crude oil prices recovering and will also underpin the requirement for alternative fuel sources, which include CTLs.
There are several reasons behind the development of CTL projects:
CTL technologies can offer greater security of supply in the provision of liquid fuels and chemicals for countries which have substantial coal reserves.
These countries are best characterised as being “oil poor, coal rich”. They have developing economies and a corresponding increase in vehicle numbers and demand for liquid fuels – as well as increasing imports of crude oil and petroleum products.
CTL projects and associated developments have the potential to create higher paid employment in coalfield areas – thereby assisting economic development.
Higher value liquid fuels and chemicals can be produced by CTL/polygeneration projects [compared to coal-based electricity technologies].
Gas-to-liquid technologies could also stimulate the development of underground coal gasification in some countries – with the product gases used for [co-production] electricity generation and liquid fuel production.
“ Stranded” [isolated] and low rank/poor quality coal deposits can be utilised in the production of liquid fuels. These are deposits which may be too remote from demand centres to be used for electricity generation or too poor in quality and therefore uneconomic for the coal export trade.
Despite being a solid fossil fuel, coal can be converted into a liquid fuel - a process known as liquefaction. One tonne of coal can produce between one and four barrels of liquids depending on the composition of the coal used and the CTL technology employed.
The liquid fuels produced from coal can be refined to produce transport fuels and a wide of range other products [such as plastics and solvents].
DCL processes aim to add hydrogen to the organic structure of the coal, breaking it down only as far as is necessary to produce distillable liquids.
Many different processes have been developed, but most are closely related in terms of underlying reaction chemistry. Common features are the dissolution of a high proportion of pulverised coal in a solvent at elevated temperatures and pressures, followed by the hydrocracking of the dissolved coal with H 2 and a catalyst.
DCL technologies may involve several stages - with the syncrude being upgraded to the desired range of products using conventional refining techniques.
DCLs have been developed by a wide range of companies and research organisations over recent decades.
Papers from Lowell Miller of the US Department of Energy have listed 7 single-stage DCL technologies & 11 two-stage technologies – with an additional 6 involving mild pyrolysis and 13 co-processing and dry hydrogenation systems.
Indirect Coal Liquefaction [ICL] has evolved since the 1920s when the Fischer-Tropsch [FT] process was developed in Germany. FT involves, at a first step, the complete breakdown of the coal structure by gasification with steam. The composition of the gasification products is then adjusted to give the required mixture of H 2 and CO, and to remove sulphur-containing catalyst poisons. The resulting "synthesis gas" is reacted over a catalyst at relatively low pressures and temperatures.
A range of catalyst compounds are used in the FT processes developed by different companies – including iron, cobalt and molybdenum.
The product spectrum from the FT plant and refinery depends on the temperatures and pressures in the process, gas composition, catalysts used, etc. The products may be paraffins, olefinic hydrocarbons or alcohols (particularly methanol).
ICL can also be the basis for complex co-production schemes [sometimes referred to as "Poly-generation"] - involving coal gasification, hydrogen production, liquid fuels production, chemicals and fertiliser production, and Integrated Gasification Combined Cycle [IGCC] electricity generation.
Many papers and report on this topic stress that poly-generation systems help “maximise the value of coal”.
Since the CTL workshop at EP 2007 there have been several reports and papers highlighting potential CTL technological advances.
There have been several reports highlighting the use of plasma gasification technology in future CTL processes. Research is being carried out in several countries – including the US and Japan.
In a paper published in November 2008, researchers in Italy proposed a new dual-bed configuration for coal gasification that, in laboratory simulations of Coal-to-Liquids production, is 71.1% more energy efficient; increases the mass yield of synthetic fuel by 39.4%; and releases 31.9% less CO 2 than conventional gasification.
The lead researcher for the study was Dr Maria Sudiro of the University of Padova. This research is ongoing.
The proposed CO 2 and H 2 pathway (bottom) rather than the traditional CO and H 2 pathway (top) can improve efficiency and reduce CO 2 emissions by 15%.
In March 2009, r esearch workers from the University of the Witwatersrand (Wits), South Africa and Rutgers University published a brief description of a new Fischer-Tropsch (F-T) reaction chemistry and process designs that they say could increase F-T process efficiency and reduce CO 2 emissions by 15% compared to the conventional process. The new process [outlined below], which uses a carbon dioxide and hydrogen route rather than the traditional carbon monoxide and hydrogen route, could also open up a pathway for the direct use of CO 2 and H 2 derived from low-carbon processes (nuclear, wind, solar, bio).
It is unlikely that these new CTL technological options will be commercialised before 2020 – but they offer considerable opportunities to significantly increase the efficiencies of CTL conversion and as well as reducing the environmental impacts of many CTL processes.
South Africa has been the world leader in CTL technologies for several decades – with the corporation Sasol having built large-scale plants using indirect coal liquefaction technology at Sasolburg in the 1950s and Secunda in the 1980s.
Sasol current consumes up to 30m tonnes/year of coal, producing up to 150,000 barrels/day of liquid fuels and chemicals.
The company has been evaluating the construction of a further 80,000 barrels/day liquid fuels plant at Mafutha near Lephalale, South Africa. A nalysts have said this multi-billion dollar project would have major environmental and financial hurdles to overcome before it is approved by both Sasol itself and the South African government.
During March 2009 Sasol announced that it was scaling back capex by 40% over the next three years. The corporation is involved in joint ventures to evaluate or develop GTL and CTL projects in several countries – including India, China [with Shenhua Group], the US, India, Uzbekistan and Qatar.
Sasol is also in early talks about a project to convert Indonesia’s reserves of lignite into liquid fuels.
Pat Davies, Sasol chief executive, was reported by the Financial Times as saying “I still believe these big projects are viable.” However, he said the company had not yet decided which initiatives would fall by the wayside.
Since the last workshop in Electric Power 2007 the Chinese CTL sector has moved forward with several commercial developments.
A series of coal-to-chemicals projects, based on gasification technology, have been completed in several Chinese provinces. Other CTL plants, using DCL and ICL technologies are also under construction.
However, in August 2008 the central government had placed severe restrictions on many liquefaction projects under construction.
It felt that too many projects were being developed before the technologies were proven at the commercial scale.
However, the most prominent CTL project is being developed in Inner Mongolia by the integrated mining and energy Shenhua Group Co .
This huge DCL project, which is being built in two stages, will have an estimated annual output of 5 million tonnes. The first stage includes three production lines with total investment of 24.535 billion yuan. The first line has cost 12.3 billion yuan and has a predicted oil yield of 1.08 million tonnes a year.
The first trial operation of this plant was launched on 30 th December 2008 and the quality end products, diesel, naphtha and liquefied natural gas, were produced on the second day. The trial was stopped after it ran successfully for more than 300 hours. Further extended trials will be carried out during Spring/Summer 2009.
It is currently anticipated that this initial stage of the plant will be fully commissioned before the end of 2009.
Another CTL project has been developed in Inner Mongolia by Yitai Group .
In March 2009, Yitai Group announced a successful test run with its 160,000-tonne indirect CTL facility, producing quality diesel oil and naphtha.
Based in Jungar Banner, Inner Mongolia, Yitai Group has an annual output of 100 million tonnes of coal. Its CTL project was approved by the central government in 2005 and began construction in 2006, with an investment of nearly 2.7 billion yuan (395 million U.S. dollars).
Yitai Group plans to upgrade the facility and extend its annual production capacity to 600,000 tons with ultimate capacity of five million tons.
The Yitai facility is China's first industrial-scale CTL plant using ICL technology. The company has indicated that by improving the technology and having economies of scale in the next generation of ICL plants, it can reduce production costs to approximately US$40/barrel crude oil equivalent.
The outlook for CTL plant developments in China is currently unclear.
Reports in the Chinese media at the start of 2009 indicated that the country’s government was more favourably included to allow the development of CTL projects – as they will assist the country’s energy security.
Both Shenhua Group, Yitai Group and other companies with ongoing commercial developments are currently proceeding with their project schedules.
Other companies in China – including the mining group Datang and state-owned petroleum giant CNOOC – have announced that they are actively evaluating the development of new coal gasification/CTL projects [including a possible large project in Shanxi province].
However, other key partners in the Chinese CTL sector – most notably Sasol and Shell – appear to have postponed their development plans for the next few years.
The US is currently reliant on overseas suppliers for over 65% of its crude oil supplies - and this figure is set to rise still further over the next decade making the US increasingly vulnerable to geopolitical turmoil, supply disruptions and future price hikes.
While the US has a rapidly diminishing volume of crude oil reserves, it possesses significant indigenous coal resources [much of which can be economically extracted]. Proven reserves of coal exist in 26 states - and US reserves amount to 250-years supply at current rates of consumption.
Until recently, activity in the USA centred around the development of several coal-to-liquids pilot plant projects. However, over the last two years several larger-scale coal liquefaction/polygeneration projects have been announced.
Major projects [involving feasibility studies, design stage work, or construction phase] involve several companies and project partners. These include:
DKRW Advanced Fuels
The projects have capacities ranging from 2,000 to 80,000 barrels/day.
Syntroleum Corporation have formed a joint venture wit Tyson Foods. Dynamic Fuels will utilise Syntroleum’s Technology to convert animal fats and greases provided by Tyson into ultra-clean renewable diesel and jet fuel. The first production plant is being constructed at Geismar, Louisiana.
Several Canadian companies [including Cash Minerals, Silverado, West Hawk Development Corp] are also evaluating or developing CTL projects – primarily in North America & China.
DKRW Advanced Fuel s are developing a large CTL project at Medicine Bow , Carbon County, Wyoming. This proposed p roject is a greenfield, mine-mouth, industrial gasification facility producing methanol – which will be converted to produce 15,000 to 20,000 barrels per day of gasoline using ExxonMobil methanol-to-gasoline (MTG) technology.
Arch Coal are a major shareholder in the DKRW Advanced Fuels.
In March 2009 DKRW reported that the construction phase of the project is expected to begin in 2010 – with fuel production scheduled for 2010 [timescale being subject to the project obtaining all the necessary permits]. The project has been delayed by the fall in the price of crude oil and the credit crunch in 2008/09 - and also faces significant opposition from environmental groups.
Support for CTL has been provided by the US Department of Defense in developing its Clean Fuel Initiative. A selection of coal-based and biomass-based fuels have been tested in a range of aircraft.
Sampling tubing and instrumentation
control cables laid out on the pavement
beside NASA’s DC-8 flying laboratory in
between synthetic fuels emission and
engine performance tests at the Dryden
Aircraft Operations Facility in Palmdale,
During early 2009 NASA and 11 other research groups, including researchers from the US Department of Defense (DoD), Federal Aviation Administration (FAA), and the Environmental Protection Agency (EPA), tested two synthetic jet fuels derived from gasified coal and natural gas using the Fischer-Tropsch process (Jet CTL and GTL). These tests are part of the Alternative Aviation Fuel Experiment [AAFEX].
Many environmental groups in the US have been extremely vocal in their opposition to new CTL plants - saying the plants are dirty and will only increase the nation’s carbon footprint and cause more global warming. Their influence at the Congressional and State levels has undermined the support for CTL from the sector’s key political allies.
Protesters in Washington D.C. – 1 st May 2009
It currently looks like CTL in the US will not make a significant contribution to liquid fuel production until at least the middle of the next decade – assuming that the financing is available for a new generation of plants and that environmental constraints and political opposition are overcome.
Reliance Industries Limited (RIL) (based in Mumbai) outlined plans in late-2008 to develop an integrated power project that would include coal mining, a 1,000-megawatt (MW) power plant fuelled by coal rejects, a coal-to-liquid (CTL) plant, and a fly-ash utilization unit.
RIL has signed agreements with ExxonMobil Corporation, Headwaters Inc., and the German engineering company Uhde GmbH to help implement the plan.
The proposed power plant is a partnership with Torrent Power Limited (Ahmedabad, Gujarat).
RIL plans to set up the project at Angul in the Dhenkanal district of Orissa. Land acquisition has been started by the government and a 1,000-acre plot has already been identified for the CTL unit near Orissa's Gopalpur port. The CTL unit would involve a range of activities – including coal mining, the conversion of coal to oil, coal gasification, and the production of fertilizers such as ammonia from the coal-based gas.
Companies based in Australia has been developing several underground coal gasification projects which will provide opportunities to test this evolving technology – with small volumes of product gas being used for power generation and possibly CTL production.
In April 2009 Australia-based Regal Resources has completed a share placement to fund the pilot testing of a novel Underground Coal to Liquids (UCTL) process near Melbourne. Regal will seek to acquire Magma Limited, the holder of UCTL patents.
UCTL is an in situ process that converts brown coal/lignite to liquid hydrocarbon and gas products within the coal seam. Each component of the process has been demonstrated in the laboratory, but there has yet to be a field test.
Another key player in Australia is Linc Energy . In October 2008, Linc Energy successfully produced the first hydrocarbon liquids from its Chinchilla demonstration facility in Queensland [shown below] which introduces underground coal gasification (UCG) synthesis gas into a Fischer-Tropsch reactor that produces high quality synthetic fuel. Linc Energy is licensing Syntroleum's CTL technology.
Linc Energy have also announced plans to develop UCG activities in the Powder River Basin, Wyoming, USA – with the goal of producing fuels like ultra clean diesel and Jet A1. Other UCG developments in Vietnam have also been proposed.
Altona Energy are also continuing feasibility work for t he Arckaringa Project.
Altona holds three exploration licences covering 2,500 sq. kms in the northern portion of the Permian Arckaringa Basin in South Australia. All three deposits lie close to the Adelaide to Darwin railroad and the Stuart Highway.
Altona’s primary focus is the completion of a bankable feasibility study for an integrated 10 million barrel per year Coal to Liquid (CTL) plant with a 560 MW co-generation power facility.
The other prospective project in Australia is the Monash Energy Project . The project envisages a large CTL plant producing up to 60,000 barrels/day of FT diesel as well as associated power generation. Brown coal will be the fuel source – with the reserves located in the Latrobe Valley, approximately 160km to the east of Melbourne, Victoria.
The development of this project [like other large coal-based projects in Australia] will require CCS. The project developers have yet to announce their final plans.
Detailed feasibility studies for CTL projects have been carried out in several other countries – most notably New Zealand and the Philippines .
There has also been considerable interest in developing CTLs in Indonesia . Sasol is currently carrying out a feasibility study for a series of coal-to-liquids plants in Indonesia which could have a targeted combined capacity of 1.1 million barrels per day.
The underlying reasons for developing CTL capacity in these countries remain today. They have indigenous coal resources and significant imports of crude oil and petroleum products. However, the credit crisis conditions, which have affected global trade and the development of these projects, needs to abate before any major development work commences.
The principal factor affecting this sector is the future price of crude oil . Currently crude oil prices are recovering from their lows caused by falling global demand.
Prices are currently in the range of US$55-60/barrel.
Most analysts predict that prices will increase to US$65/barrel [or higher] by 2010. Long-term price forecasts are notoriously unreliable!
CTL projects will require crude oil prices to remain at/above US$65-70/barrel before many currently moribund CTL projects are developed – and possibly US$85-90/barrel if CCS is included as part of the production facilities.
The long-predicted Peak Oil period will eventually arrive – probably early in the next decade. The current lack of investment in oil exploration and production due to the current global recession will probably lead to supply and demand for crude oil tightening significantly within the next two to three years.
Demand for transport fuels, both globally and in the US, will recover as the global economy exits from the current economic recession. Increasing demand for transportation fuels [caused by future growth in global vehicle populations] will drive up crude oil prices. This will undoubtedly assist the development of alternative fuel sources – including CTLs.
A key challenge affecting the development of CTL [and polygeneration plants] will be the potential commercial risks . Will the [battered] banks and project financiers overcome their fears of crude oil price movements and other market-related risks and support CTL projects?
In late April 2009 Industrialinfo.com broadcast a webcast containing some background data on the development of coal gasification plants in the US. There are about 30 coal gasification projects in the pipeline across the United States.
These projects are non-IGCC, non-power generation coal gasification projects aimed at producing hydrocarbons mainly, syngas, LNG, and CTLs [including diesel]. At this stage not one of these projects has moved into the construction phase.
The capital required to engineering, equip and construct these plants totals more than $59 billion, and in the current credit crisis, finding the funding to move these projects forward has been challenging for the industry.
When the availability of credit improves these projects may be revived.
Another key factor which has caused the cancellation or delay of many CTL projects during 2008/09 has been the escalation of the capex for many CTL plants.
The construction of an 80,000 barrels/day CTL plant in the US could cost in excess of US$5 billion.
Detailed cost breakdowns of major projects are rarely published – and are frequently shrouded in commercial confidentiality.
The lack of operating CTL plants has also hampered any reliable assessments of capex and operating costs.
The imposition of additional environmental regulation on CTL plants – particularly future regulations involving carbon capture and storage – is also acting as a major deterrent to their construction.
Until legislation and regulation on the development of CCS in US and other countries is finalised it is impossible for the project developers and their financial backers to produce accurate estimates on plant costs.
In many countries [including the US] there is a serious shortage of engineers and specialists who are needed to build and operate new CTL facilities. Long-term training programmes will be required.
More RD&D is required over the next decade to improve CTL plant design, efficiency and operational characteristics. Process intensification could ensure significant improvements in plant efficiency and also the economic utilisation of smaller, stranded coal deposits.
There are also opportunities for new CTL technologies to be commercially proven by 2020 – although this will require a significant capital investment by the main companies.
Improvements in catalyst utilisation [particularly the use of nano-catalysts] will help reduce the costs of producing CTL fuels. This is important as some catalysts are based on high cost feedstocks – such as cobalt and molybdenum.
CTL and associated chemical plants need to be operated to best international health, safety and environmental standards to avoid incidents causing serious loss of life – plus land, water and air pollution.
Developing and maintaining these health, safety and environmental standards will be a challenge for China as well as other countries.
Aftermath of Chemical Plant Explosion in China – 26 th August 2008
The production of liquid fuels from coal involves the production of 150% or more of CO 2 compared to fuels produced by traditional crude oil refineries.
US research studies have indicated that if CTL production facilities are fitted with CCS their CO 2 emissions can be reduced to below that of crude oil refineries.
A study produced by the US Department of Energy (DOE) National Energy Technology Laboratory [NETL], which was published in early 2009, concluded that a CTL process with carbon capture and sequestration (CCS) yields a diesel fuel with 5-12% less lifecycle greenhouse gas (GHG) emissions compared to the average emissions profile of petroleum-derived diesel, based on the US national average in 2005. The report noted that further reductions in the GHG profile of the fuel can be achieved if coal is co-gasified with biomass.
A further report from Rentech on the GHG emissions from its proposed Natchez CTL plant concluded that the fuels from the facility would produce 11% to 23% fewer carbon dioxide emissions than would result from fuels produced from conventional crude refining.
Rentech proposes using petroleum coke as feedstock with the Rentech Fischer-Tropsch process to produce approximately 30,000 barrels per day of synthetic fuels, specialty waxes and chemicals. The facility is designed to capture approximately 80% of the carbon dioxide generated in the production process, which will be sold under a long-term agreement with Denbury Resources for enhanced oil recovery in the region.
During April 2009 Shenhua Group announced that it is carrying out research and development for the country's first carbon capture and storage (CCS) project at its new direct CTL plant in Inner Mongolia.
Carbon sequestration measures, including geological storage, are being considered for Shenhua's CCS project, which could be put into full operation during the next decade.
It is likely that other CTL project operators in China will watch carefully watch the CCS RD&D work by Shenhua before committing themselves to adopting this technology.
Large-scale CTL plants encourage the development and expansion of coalfields [often in remote locations]. Most CTL plants will be located in close proximity to low-cost sources of coal.
Surface mining can have significant negative environmental impacts. In some regions new/upgraded transportation infrastructure may also be required to cope with increased coal extraction.
And CTL plants may accelerate the depletion of coal resources in some regions. This is a concern in China where total coal production and demand is now anticipated to reach 3 billion tonnes per annum during the next decade.
CTL plants also consume large volumes of water [several barrels of water per barrel of product].
This a major environmental issue in regions with a low rainfall [such as northern China]. Water is required for a range of uses at a CTL plant: process water, boiler feed water, steam for water shift reactions, and cooling water to remove heat at various production stages [particularly in the highly exothermic FT processes].
Reports from China have indicated that Shenhua Group has installed water recycling facilities at its new CTL plant – located in the arid Inner Mongolian region. To provide enough water for the Ordos CTL project, groundwater is piped in from 100 kilometres away.
The price of water may significantly increase if regular severe droughts continue in China. They could act as a deterrent to the future expansion of CTL production.
CTL fuels will have to compete with other energy sources in the coming decades – not just traditional crude oil, but also biofuels, natural gas and non-traditional hydrocarbon fuels.
The future development of CTL technologies will depend on the CTL plants being able to produce fuels that are competitive in the transportation fuel and chemicals markets - and also being able to meet increasingly strict environmental operating standards.
Strong government support must be a key element in the future development of CTL projects.