More on Primus Green Energy's Use of Natural Gas as a Bridge Feedstock

Primus Green Energy Multi-Feedstock Synthetic Fuels
Here is another look at Primus Green Energy and its compromise use of cheap natural gas as feedstock -- in place of the original plan to use biomass feedstock. Just like Sundrop Fuels, Primus Green Energy is behaving in a pragmatic and flexible fashion, to establish proof of technology first, and to develop the essential cash flow which will allow them to proceed with their longer range plans.

The Hillsborough, New Jersey-based company has developed a process for converting biomass into gasoline, jet fuel, and other chemicals. But because its biomass technology isn't quite ready for prime time and its process works with natural gas, its first demonstration plant will use natural gas as a feedstock.

"We're using natural gas as either a bridge to biomass or a bridge to natural gas," says CEO Bob Johnsen, a biofuels veteran who joined the company in March. "We can develop our processes for biomass while concurrently producing product at larger scale."

The company broke ground on the demonstration plant last week and is seeking to raise $60 million to $70 million for a commercial-scale operation which it hopes to begin building later this year or next year. To date, it raised $40 million from conglomerate Israel Corp. in 2007.

Johnsen, a co-founder of Mascoma and the company which became Verenium, was attracted to Primus Green Energy because the flexibility of its technology and because it's at stage where it can be scaled up, he says.

The company has modified a 1970s-era process called Methanol to Gasoline (MTG) originally developed by Mobil. Its plants have multiple steps but the core technology is converting synthesis gas, or syngas, into gasoline or jet fuel. That syngas can be made either from biomass, such as wood pellets or miscanthus, or from natural gas using a steam reformer. Because it's biomass-to-syngas gasifier didn't achieve the performance needed, the company will move ahead with natural gas first.

Once the syngas is produced, the gas is treated with catalysts to produce methanol and then fed into a reactor to synthesize the gas into liquid high-octane gasoline or jet fuel. The company has modernized the MTG process and engineered a more efficient system using a combination of its own inventions and off-the-shelf products, executives say. _TechnologyReview

There is nothing wrong with biomass to liquids in principle. But BTL cannot compete with either GTL or CTL in today's marketplace. And if the price of crude oil keeps dropping, even GTL will be unable to compete with oil.

It is fine to be idealistic. But if you are in business, you will need to temper your idealism with a healthy dose of realism, based upon current and near-term future market conditions.

Sundrop's Methanol to Gasoline Plant to Use Exxon Mobil MTG

The methanol-to-gasoline (MTG) process developed by Exxon Mobil doesn't care where the methanol comes from originally. MTG turns methanol into gasoline regardless of the original source -- natural gas, coal, biomass, etc.

Exxon Mobil Methanol to Gasoline Process

Economics will dictate whether the overall process can be profitable in the current marketplace -- and business startups had best pay attention to a thorough economic analysis before the first shovelfull of dirt is dug.

Sundrop Fuels Inc. intends to fight the current economic conditions of cheap natural gas and cheap coal, in order to prove a point. Sundrop wants to prove that it can fight the markets and survive, while producing "green gasoline."

Sundrop Fuels will use a multi-phase process to convert sustainable forest waste into a bio-based drop-in gasoline for use in today’s combustion engines. A gasification process converts the forest waste combined with hydrogen from natural gas into a synthesis gas, which will then be converted into methanol and then into gasoline in a fixed bed reactor system via the MTG process.

The MTG process first dehydrates methanol to dimethylether (DME); an equilibrium mixture of methanol, DME and water is then converted to light olefins (C2-C4). A final step synthesizes higher olefins, n/iso-paraffins, aromatics and naphthenes. The shape-selective catalyst limits the synthesis reactions to 10 carbons.

MTG reactor product is separated into gas, raw gasoline and water. Raw gasoline is separated into LPG, light gasoline and heavy gasoline; heavy gasoline is hydro-treated to reduce durene content, then heavy and light gasoline are re-combined into finished MTG gasoline. The result is sulfur-free gasoline with a typical 92 Research Octane.

The gasoline yield represents 38% of the feed, and 87% of the hydrocarbon product. Water (H2O) represents 56% of the feed.

The company’s first facility will also provide an operational platform for Sundrop Fuels to begin field integration of its proprietary RP Reactor radiant particle heat transfer gasification technology. The super-efficient, ultra high-temperature process will drive Sundrop Fuels’ future massive-scale biofuels plants, planned to produce more than 300 million gallons of renewable, drop-in biofuels annually.

Plans are for Sundrop Fuels to achieve a combined production capacity of more than one billion gallons by 2020—a significant percentage of the cellulosic advanced biofuels goal set by the nation’s Renewable Fuels Standard (RFS).

Significant backing for Sundrop Fuels comes from Chesapeake Energy Corporation, the largest producer of natural gas in northern Louisiana’s Haynesville Shale Field and second-largest producer in the nation. Chesapeake invested $155 million in Sundrop Fuels in mid-2011. The company’s investors also include two of the world’s premier venture capital firms, Oak Investment Partners and Kleiner Perkins Caulfield & Byers. _GCC

As we mentioned in an earlier posting, Sundrop will prove much of its technology using natural gas as a feedstock Sundrop will use natural gas to power its gasifiers and as a hydrogen donour -- thus explaining their success at raising capital from Chesapeake Energy Corp. Chesapeake needs to prove that GTL can be profitable -- either using MTG or using Fischer Tropsch to make diesel -- and it needs to help boost as many other uses for natural gas as possible. Chesapeake doesn't care how the gas is used so long as it is profitable.

Sundrop's pragmatic move to the initial use of natural gas for its MTG plant instead of using solar powered gasifiers, demonstrates a certain flexibility that is extremely important, if a "green business" is to stay in business.

First establish a cash flow while proving and perfecting your processes. Then you can branch out.

Maugeri: Global Crude Production Capacity Up to 110 mmbd by 2020

Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.

Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production (the level of production targeted by each single project, according to its schedule, unadjusted for risk) of more than 49 million barrels per day of oil (crude oil and natural gas liquids, or NGLs) is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.

After adjusting this substantial figure considering the risk factors affecting the actual accomplishment of the projects on a country-by-country basis, the additional production that could come by 2020 is about 29 mbd. Factoring in depletion rates of currently producing oilfields and their “reserve growth” (the estimated increases in crude oil, natural gas, and natural gas liquids that could be added to existing reserves through extension, revision, improved recovery efficiency, and the discovery of new pools or reservoirs), the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1. This would represent the most significant increase in any decade since the 1980s. _Belfer Center _ Maugeri: Oil the Next Revolution from Executive Summary

Oil The Next Revolution _ Maugeri PDF
In the Maugeri PDF report linked above, oil analyst Leonardo Maugeri details where the expected new oil production capacity will be developed, and how much increase in production capacity should be expected.

OTNR _ Maugeri PDF
Above you can see the projected country-by-country increase in production capacity, per Maugeri. The report suggests that oil prices may have been pushed above supply and demand fundamentals recently and prior to the 2008 price peak, due to what are essentially non-market forces.

There is a definite risk of an oil price collapse, says the report, should the global economic situation worsen -- particularly should a severe recession hit China. Such a price collapse is defined as oil below $50 /bbl.

Maugeri expects that if such an oil price collapse occurred, that market forces would self-correct within 2 years, with minimal damage to long term oil production.

OTNR _ Maugeri PDF (from summary)


Video Source

Nuclear Power: Myths and Mythconceptions

Here is a short list of "myths of nuclear power." Some of them may be partially true in a few cases, and others may be true for current generations of nuclear reactors -- but not for future generations of advanced nuclear reactors.

Here is a list of things about nuclear power generally assumed to be true by the public. In 20 years, it may be difficult to conceive that an intelligent person would have ever believed most of them.

1. Nuclear reactors are unsafe, as exemplified by the Chernobyl and Fukushima disasters — A 2001 study by the Paul Scherrer Institute in Switzerland revealed that nuclear had the best safety record of all energy sources, causing 31 deaths, compared with 4,000 deaths caused by hydropower. During the nuclear reactor meltdown in Fukushima, the highest level of radiation that workers were exposed to was 250 mSv (millisieverts), which increases the risk of cancer by just 4-5%.
2. Nuclear energy makes only a minor contribution to world energy needs — It in fact accounts for 14% of world electricity.
3. Uranium tailings (radioactive decay from uranium mining) can be harmful if exposed to and can increase the risk of cancer — According to the World Nuclear Association (WNA), “the level of radioactivity is very low and with normal engineering they pose no threat to anyone.” The typical amount of radiation the average human is exposed to is 2 mSv per year and there is no evidence of any harm below about 100 mSv per year.
4. Nuclear power plants are sitting ducks for terrorists — There have been attacks attempted in the past — for example, by Basque separatists in 1977 — but no attack has caused widespread damage. Most nuclear plants have substantial and robust containment structures that would be difficult to breach. A terrorist attack could spark a nuclear meltdown similar to that seen at Fukushima, but replicating a force equivalent to an earthquake would be difficult. However, the water pools in which reactors store used fuel outside containment structures are more vulnerable and could cause real damage if attacked.
5. Nuclear power is far from emissions-free, and the energy inputs from fossil fuels required in the generation of nuclear energy negate any advantage in the reduction of direct carbon dioxide emissions. However, according to the WNA, “Energy inputs into the nuclear fuel cycle produce only a few (eg, 1-3) percent of the CO2 emissions saved.”
6. Dangerous weapons programs in countries such as Iran and North Korea are linked to their nuclear reactor programs –The WNA notes that Iran has failed to convince anyone that its secretive enrichment program is connected to its nuclear reactor program, and North Korea has no civil reactor program.
7. Nuclear energy makes only a minuscule contribution to reducing carbon emissions — According to the WNA, “For every 22 tons of uranium used, one million tons of CO2 emissions is averted. Doubling the world’s nuclear output would reduce CO2 emissions from power generation by about one quarter.”
8. As the price of fossil fuels continues to rise, nuclear energy offers a cheaper alternative source of energy — In 2009, the Union of Concerned Scientists estimated that, between 2002 and 2008, costs for new nuclear plant construction rose from between $2 billion and $4 billion per unit to $9 billion per unit. In addition to this, the Massachusetts Institute of Technology estimates that the cost of producing nuclear energy is about 30% higher than for oil or gas.
9. Transportation of uranium and other radioactive material is hazardous — Uranium is transported in the form of UOC, a weakly radioactive uranium oxide concentrate. According to a WNA brochure titled “Safe and Effective Transportation of Uranium,” “UOC is harmful only if inhaled or ingested. Provided sensible precautions are taken to avoid inhalation or ingestion, it will not present a health hazard to people handling it.” The publication notes that the uranium is packaged in steel drums with a tight-fitting lid secured by a steel locking ring, stowed inside a sea freight container and secured using a webbed, Kevlar-based strapping system.
10. Insurance companies will not insure nuclear reactors because they pose too much of a risk — All reactors in the West are insured. In fact, the WNA points out that nuclear installations are a highly sought-after business because of their high engineering and risk management standards, which have resulted in a very good claims record. However, Chernobyl was not insured, because it was considered to have a high-risk design due to its lack of containment structure. According to the WNA, “Operators of nuclear power plants are liable for any damage caused by them, regardless of fault. They therefore normally take out insurance for third-party liability, and in most countries they are required to do so.” Direct damage and third-party liability insurance is typically placed with a national insurance pool, or one of the mutual insurance associations such as Nuclear Electric Insurance Limited (NEIL).

_Greenbang

Future nuclear reactors will be built to burn virtually all of the nuclear fuel, leaving nothing behind that can be turned into nuclear weapons.

Some future reactors will utilise the thorium cycle, which is more resistant to proliferation risks than some of the uranium - plutonium cycle reactors.

Future scalable reactors, built in factories to high quality standards, will be manufactured more economically -- and sized to meet particular needs of local grids and micro-grids.

As governments clean their houses of older generations of anti-nuclear activist-bureaucrats, smarter government policies and regulations toward nuclear power will make it more difficult for political activists to tie up nuclear projects in court. It is this legal limbo caused by activist litigation, and obstructionism within government agencies caused by activists cum government officials, which holds back a safer and more affordable future of nuclear power.

Turning Nuclear Waste Into Thousands of Years of Electrical Power

Scientists at Argonne National Labs are developing ways of utilising 95% of the energy in Uranium fuel rods -- rather than the mere 4% or so currently being extracted. They are developing new techniques of chemical separation of waste from fuel, and more efficient ways of burning the recycled fuel after being separated from the waste.

When used fuel comes out of a light-water reactor, it’s in a hard ceramic form, and almost all of it is still just uranium – about 95 percent, along with one percent other long-lived radioactive elements, called actinides. Both of these can be recycled as fuel. The remaining four percent are fission products, which are truly unusable.

Pyroprocessing begins by chopping the ceramic fuel into little pieces and converting it into metal. Then it’s submerged in a vat of molten salts, and an electric current separates out uranium and other reusable elements, which can be shaped back into fuel rods.

The truly useless fission products stay behind to be removed from the electrorefiner and cast into stable glass discs. These leftovers do have to be put into permanent storage, but they revert back to the radioactivity of naturally occurring uranium in a few hundred years – far less than the thousands of years that untreated used fuel needs to be stored. _PO

One of the reasons why so little uranium is used is that almost every commercial reactor today is a type called a light-water reactor, or LWR. While LWRs are good at many things, they aren’t designed to wring every last watt of energy out of fuel. But LWRs aren’t the only type of reactor. Another class, called fast reactors, boasts the ability to “recycle” used fuel to get much more energy out of it. The main difference between the types of reactors is what cools the core. LWRs use ordinary water. Fast reactors use a different coolant, such as sodium or lead. This coolant doesn’t slow the neutrons as much, and consequently, the reactor can fission a host of different isotopes. This means that fast reactors can get electricity out of many kinds of fuel, including all of that leftover used fuel from LWRs. (LWRs can burn recycled fuel too, with some modification, but they aren’t as good at it.) _PO

More on pyroprocessing used nuclear fuel (PDF)

Extracting 30 times more energy from the same amount of nuclear fuel will help to make the same amount of fuel go much further. While we are being more efficient at using the nuclear fuel (and nuclear wastes) that we already have, we can learn many more ways to generate energy from mass.

The limits are in our heads.

Clashing Viewpoints: Natural Gas Glut vs. Natural Gas Shock! You Be the Judge

For the past few years, a deluge of unconventional natural gas has been driving prices down across North America. But there is a good deal of disagreement between mainstream energy analysts and analysts of the, shall we say, doomer persuasion, as to whether we are seeing a true and lasting glut of natural gas supplies -- or whether we are seeing a mere "flash in the pan" of fools' gas.

Here is mainstream point of view, pointing out the multiple factors which are leading to a sustained natural gas glut -- at least in North America:

Natural gas producers are cutting production in hopes of bringing down supplies and therefore increasing prices. The industrywide gas rig count fell by 23 last week, to 624, the lowest in 10 years, according to driller Baker Hughes (BHI). Yet production keeps growing. It is projected to average 69.2 billion cubic feet per day in 2012, up from an average 66.2 billion cubic feet per day last year, according to the Energy Information Administration. And supplies keep growing. The EIA predicts natural gas in storage will reach a record 4.1 trillion cubic feet by October, compared with 2.5 trillion cubic feet now.

One reason: Oil drillers produce gas as a byproduct, and with oil prices high, oil drilling is in gear. “It’s very attractive to drill for oil, so that will continue,” says Grubert. “Associated gas from oil wells will offset reduced drilling specifically for natural gas.” The warm winter, which reduced demand for natural gas used for heating, also helped keep supplies high. Gas pumped as a byproduct of oil and other liquids will represent 75 percent of the increase in natural gas production this year and as much as 90 percent next year, according to Barclays (BCS) research. Such byproducted output, as it is called, will probably keep rising as long as oil remains above $75 a barrel, the bank says.

The gas glut comes as the industry is banking on the future of hydraulic fracturing, or fracking. The American Natural Gas Alliance reckons that the boom in the exploitation of shale natural gas could represent 60 percent of U.S. natural gas production by 2035, compared with 27 percent in 2010. _BW

The author is explaining why production of natural gas in North America continues to spike ever higher, at the same time that prices are at record lows. He explains that even as many unconventional gas producers are cutting back on production, overall gas production continues to rise. And he tells us why.

Doomer analysts, on the other hand, see the cutback in unconventional gas production as a sign that the wells are being quickly depleted. Doomers have long predicted that the unconventional oil & gas bonanza would not last more than a few years, and they can hardly wait to pop the corks on their champagne bottles:

Money has been thrown at the industry, but the notion is dawning that the game is up and that returns will never materialize. The ponzi scheme has reached its natural limit, and investors are waking up to the realization that they have been chasing a fantasy. Ironically, just as the washout begins, natural gas prices may have bottomed.

Conventional natural gas in North America peaked in 2001. Coal bed methane and now shale gas have been revealed to be massively overblown as an energy source. Producers are reaping the consequences of malinvestment and will be going out of business. Demand has been building with the transition from coal to natural gas for power generation. This is an ideal set up for a supply collapse and subsequent price spike.

North America is poised for a huge natural gas shock. Far from being an exporter, North America is going to experience a natural gas supply crunch. Prices will be rising at the same time as peoples purchasing power falls precipitously, thanks to deflation. The structural dependency on natural gas that has been cemented in recent years is going to guarantee maximum pain as prices reconnect with reality. _BI

Those who are interested in contrasting the two viewpoints, should visit both websites linked above, and follow the links.

Economic cycles help to dictate which forms of energy will be economical to produce at any given time. Political regulations will likewise affect which resources can be tapped and which must be left in the ground.

North America has been the beneficiary of massive energy deposits, which were made available for production by improved technologies, private property laws, and a private sector that has not yet been destroyed by a bloated central government.

Prices of natural gas are higher in other parts of the world which have not had such advantages. But such high natural gas prices are unlikely to remain so high as they are, once the North American production technologies (and North American gas) begin to sweep around the world.

Meanwhile, in North America, multiple new uses for natural gas are springing up, which will eventually reverse the abrupt downward trend in prices. Natural gas prices will gain support from several technologies of substitution for crude oil -- including GTL (gas to liquids), ethylene cracking, propane dehydrogenation, LNG production, CNG use for multiple internal combustion engine applications, etc. etc.

You might say that this game is still in the opening stage.

Obama's Green Energy Policy Sinks Itself

Most intelligent people could have predicted that Obama's poorly considered green energy blitz would come to a bad end. But the Obama crew was hoping that it would stay above water at least until after the next election. No such luck.

The Obama Administration’s clean energy program is reminiscent of the Titanic after it hit the iceberg. It is taking on water, the crew has no idea of what to do, and the band plays on.

Germany and other EU clean energy advocates are facing up to the reality that they can’t right their economies while heavily subsidizing the so called clean energies that are not commercially viable and are an economic dead weight. In spite of this, President Obama continues to push his clean energy program as the key to our economic future, job creation, and energy independence. Over a 3 year period, spending on so called clean energy technologies more than doubled–$17.9 billion in FY-2007 to $37.2 in FY-2010.

The environmental community and rent-seeker continue to support his policy but unfortunately, the analytical community has jumped ship.

...Technology and energy economics are the main drivers for determining when a new technology is commercially viable. People like the President who don’t care for fossil energy keep underestimating how strongly they are embedded in our economy because of economics and utility. Fracking has resulted in an abundance of natural gas that will slowly replace coal for power generation and will have a role as a transportation fuel. The current alternatives to gasoline and diesel for transportation are too costly with the current technology and no breakthroughs are on the horizon. _Fuel Fix

Obama's green energy blitz was all about paying back campaign bundlers, contributors, and supporters. It was never about jobs and it certainly was never about real energy -- at least as far as those who understood the fundamentals were concerned.

The world is full of poor jerks who are willing to follow a charismatic leader wherever he may go. Mass movements such as carbon hysteria, green dieoff.orgiasm, and peak oil doomerism all attest to that fact.

Never has there been a greater need for independent, competent, and intelligent humans, with the ingenuity to solve the many problems which have always presented themselves to humans since the beginning of the species.

Peak ingenuity, peak competent manpower -- those are the peaks we should be concerned about.

Oil Supply and Demand in State of Flux

North America is experiencing an energy revolution of oil & gas thanks to technological innovations of production. The same and similar innovations are beginning to sweep across large areas of the globe from Eastern Europe to the Levant to South America to China to Western Siberia. Combined with improved tools of exploration and discovery, improved undersea oil & gas production, and enhanced oil recovery tools, the production side is seeing an upswing.

This increase in production, combined with a growing sense of impending global economic downturn, appears to point to an ongoing period of suppressed oil prices -- when compared to recent highs well above $100 a barrel for both Brent and WTI.

A recent Manhattan symposium on oil supply and demand attempted to shine more light on various factors contributing to today's fluctuating oil price situation:

The consensus outlook (with one outlier) is for liquid fuel production to plateau to the end of the decade. This will constrain economic growth, particularly in the OECD as the OECD sheds liquid fuel consumption to allow consumption growth in the Chindia and oil-exporter developing world. Unconventional oil (deep-water, arctic, tight-shale) all have significant geologic/geographical limits. They can be expected to support a limited duration liquid fuel plateau but are not big enough or can be brought online soon enough to support increasing production. Saudi Arabia needs $80/bbl to support its committed government spending and has stated that $100/bbl is the “fair” price they expect. This should support, apart from short term financial crisis-type demand drops, the price of oil.

...Edward Morse, Citibank - the short and long-term outlooks are bearish.

North America is where production is growing fastest. Expects production increases to continue (no backup). Expects Mexico to starting growing based on deep-water (no backup). Without Mexico, expects North America to be a net exporter.
Claims Chinese slow-down is substantial and will affect demand growth.Global recession could also impact demand.
Claims in 2013, the US will stop importing light sweet crude. Land-locked Candian crude will be part of the difference.
Sees long-tterm oil prices (end of decade) at $80 to $90.

...Ray Leonard, Hyperdynamics:

A geologist. Has seen reserves data bases from Russia and the ME.
Expects oil plateua from 2005 to 2030 of non-renewable oil production of 84 to 88 MBPD.
More and more of it expensive unconventional and deep-water oil.

...Jason Stevens, Morningstar: Tight Oil

Thinks US production Shale-Oil production grows to around 3.0 mbpd/year to 2015.
Sees total US oil growing to almost 7 mbpd/year by 2020.

...James Henderson, Oxford Academic:

Russian oil production has risen every year except on since 1998.
Currently transitioning to harder to access oils.
400 to 500 B$ investment needed to maintain current production.
There will have to be some tax breaks to maintain current production.
The export tax is an impediment on new investment because there is no allowance for investment.
Tax changes are negotiated ad-hoc, e.g. arctic different than east siberia.
Oil is 64% of export revenues, 25% of GDP, big part of government revenues.

_World of Wall Street

More at the link.
Program and links to obtain video proceedings ($200)

Expert viewpoints for the future of petroleum supply and demand are all over the map. Wise persons capable of reading between the lines should comprehend that political factors are paramount in determining future supply & demand and other determinants of pricing.

The highly politicised and pseudo-scientific movement of global carbon hysteria, has had an undue effect on the politics of oil, gas, and coal in North America, Oceania, and Europe. But such poorly reasoned political crusades can only continue for so long in the face of the inevitable economic difficulties and societal disruptions which they cause.

The future suplies of liquid transportation fuels from all sources should be quite ample, as long as advanced nuclear fission and fusion are facilitated by wiser political leaders.
Once one tacks on advanced BTL (biomass to liquids) on top of the massive unconventional CTL, GTL, KTL, BitTL, and GHTL resources, one begins to glimpse a vast horizon for production of large scale liquid transportation fuels. Over time, the economies of production become more economical -- particularly with the widespread use of advanced gas cooled nuclear fission reactors.
Uses of advanced nuclear power beyond electric power generation.
More uses of nuclear process heat.

World hydrocarbon endowment via Swindell.


More: Oil Markets in a Flux as Demand Slows Interesting weekly update for global commodities

Coal Is Becoming Both Versatile and Clean

Technology for turning coal into electric power, process heat, and liquid fuels has come a long way over the past ten years. And science and engineering have just begun developing cleaner and more efficient ways of utilising coal for heat, power, and transportation fuels.

Comparison of Various Coal to Liquids Methods (PDF)

The table above reveals the superior yields and efficiency of direct coal liquefaction (and hybrid liquefaction) as compared to gasification plus Fischer Tropsch, or indirect coal liquefaction.

Advantages of Direct Coal Liquefaction (PDF)

The presentation summary above describes some economic advantages of direct coal liquefaction over indirect liquefaction -- including lower startup costs.

Shenhua Direct Coal Liquefaction Plant

State-owned China Shenhua Group made a profit from its pioneering direct coal-to-liquids (CTL) project in the first half of this year (2011), raising hopes that the world’s second largest oil consuming nation may expand forays into alternative fuel production.

China has rich coal reserves but limited oil deposits. After backing CTL as a way of improving energy security and easing its growing dependence on overseas crude oil, China went cold on the technology in 2008, cancelling dozens of projects amid concerns about high production costs and the impact it would have on scarce water supplies.

The parent of China Shenhua Energy Co , the country’s biggest coal producer, produced 470,000 tonnes of oil products from coal in the first half and costs of the fuel were equivalent to crude oil prices of less than $60 a barrel, according to Shenhua Group’s General Manager Zhang Yuzhuo. _Shenhua DCL Project Proves Profitable

As long as oil costs remain high (above $80 a barrel), such projects should provide healthy returns to their backers.

The CTL approach depicted above utilises methane as a hydrogen donour in a unique liquefaction process which utilises gasification plus methanol production. The methanol can be further converted to diesel or jet fuel.

More details

This Accelergy approach to CTL utilises biomass gasification as a hydrogen donour for the coal liquefaction. At this point in time, methane is likely to be more practical to provide hydrogen.

The above image portrays three ways of CTL, including Exxon Mobil's coal to methanol to gasoline (MTG), traditional gasification plus Fischer Tropsch, and the use of biomass gasification to provide hydrogen for direct liquefaction of coal to liquids.

And just to remind you that the world is not giving up on coal for the generation of electrical power, this EIA graphic projects a steady growth in the use of coal for electrical power generation through 2035 -- consistent with the recent 2012 BP Statistical Review.


Coal is second in size only to gas hydrates as a global hydrocarbon resource. Any rational projection of future energy and fuels production would necessarily include coal.

Rather than to reject coal altogether, more intelligent energy analysts and policy-makers would do better to continue to press for cleaner, safer, and more efficient ways of utilising this massive energy source -- as a bridge to future sources of energy which can be used for many thousands of years, such as advanced nuclear fission, nuclear fusion, and hybrid fission - fusion.

Coal Will Thrive Long After Obama Is Gone

The National Coal Council delivered a report to the US DOE which points to increasing uses of coal -- to generate electric power, to produce large quantities of liquid fuels via CTL, and to expedite enhanced oil recovery (EOR) using CO2 recovered from coal gasification (both IGCC and CTL).

• By 2035, the combination of coal-based EOR and CTL technology could provide up to 30 percent of U.S. liquid fuel demand and ensure America's energy security for decades....
• Use of ... CTL could generate $200 billion in economic activity, more than 1 million skilled jobs and $60 billion in tax revenues.
• At least 100 gigawatts of advanced coal generating capacity could be built or retrofitted over the next two decades. These advanced plants would use an additional 300 million tons of coal annually.
• CTL plants with carbon capture could convert coal into more than 2.5 million barrels a day of additional oil. An additional 450 million tons of coal would be used annually in these operations.
• Capturing a high volume of CO2 for commercial purposes, coupled with CTL operations, would increase coal use to 1.75 billion tons annually. This production level is well within the capability of the United States, home to 30 percent of the world's coal reserves.

_Nat.Coal Council Report to US DOE

Obama's misguided war against coal -- along with his war against all other forms of viable energy -- mark him as a political activist rather than a true leader. Obama's war against energy and against the US private sector has led to a stagnant economy with very slow job creation.

Meanwhile, Primus Green Energy is pushing ahead with a shale gas - to - liquids project which hopes to produce 100 million gallons of gasoline from shale oil per year.

The allure of cheap nature gas has altered the course of a New Jersey biofuel start-up’s path to commercialization. Shale gas will serve as Primus Green Energy’s (PGE) bridge fuel until it shifts to biomass feedstocks.

PGE today held a dedication ceremony for a demo plant at its Hillsborough, NJ headquarters. Local luminaries and a swarm of politicians, including former governor Jim Florio, Representative Leonard Lance, and an Obama administration agricultural official, were in attendance.

The plant will create up to 5 barrels of fuels per day, which will be used for customer certification testing and approvals. It is also a proof of concept for technology that PGE says can scale to upwards of 100 million gallons per year at a significantly higher yield (35 percent) than the industry average.

The company is hoping to raise US$150 million to build a facility next year that would produce 20 million gallons of fuel annually. In comparison, the Pearl GTL (gas to liquids) facility in Qatar has cost over $19 billion to build. _SP

The Pearl GTL plant in Qatar expects to yield profits of $6 billion a year, for as long as the price of crude oil (Brent) remains above $80 a barrel.

Primus Green Energy had intended to be a biomass-to-liquids (BTL) company rather than a GTL company, but basic economics dictated Primus' decision to go with shale gas rather than biomass -- at least in the beginning.

Meanwhile, commodities prices remain well above 2007 levels, suggesting that without big government stimulus from the US, Europe, and China, there is still significant deleveraging and deflating of bubbles that could occur.

The Obama government has injected about $1.5 trillion per year of fiat stimulus into the US economy, with very little positive effect to show for it -- except a rapidly growing debt which could destroy the economy if interest rates should be forced upward.

The energy world does not exist apart from the political and economic worlds, but is rather inextricably enmeshed within both.

Obama has attempted to re-shape the energy worlds, the political worlds, and the economic worlds -- as a legacy to his own unique greatness. Time will tell what lasting impact Obama's policies have had on those worlds -- if any.

Coal Under Attack on All Fronts . . . Plots Comeback

Coal is the second-most plentiful hydrocarbon resources on the planet, second only to gas hydrates. Yet, increasingly, coal is being displaced by natural gas power plants across North America, and is being threatened with replacement by new generations of safe, clean, affordable, small modular nuclear fission reactors.

Is coal taking all of this lying down? No. In fact, in many ways, coal is the rising star of global energy production.

image via GWPF

BP’s annual statistical review reports that global coal production increased 6 per cent last year, twice the celebrated rate of increase in global natural gas production. This most notorious of fuels now accounts for 30 per cent of global energy consumption – the highest percentage since 1969. It will almost certainly account for more in the years ahead. It is, after all, one of the cheapest primary sources of energy in the world. And its reserves are, for all practical purposes, inexhaustible.

...Americans themselves are consuming less coal – 5 per cent less in the past decade. As U.S. electrical producers shift from cheap coal to cheap natural gas, more coal will be released for export to other countries (where demand for coal increased by almost 50 per cent in the same decade, the energy equivalent of 23 million barrels of oil a day). Already the world’s fourth-largest coal exporter, after Australia, Indonesia and Russia, the U.S. could plausibly become the world’s largest exporter in coming years. The United States possesses more coal reserves, after all, than any other country.

How much more? Energy analyst Robert Bryce, a senior fellow at the Manhattan Institute, says U.S. coal reserves contain nearly as much energy as the proven oil reserves of all 12 Organization of Petroleum Exporting Countries combined. U.S. coal deposits, he says, hold the energy equivalent of 900 billion barrels of oil. The OPEC countries have proven oil reserves of one trillion barrels. _Globe&Mail

We know that new, super-clean coal plants using IGCC (integrated gasification combined cycle) and CHP (combined heat and power) technologies, are both very efficient and very environmentally responsible. But science and engineering have just begun to start cleaning up coal's act:

One of the new technologies, which involves pressurizing the oxygen, is being developed by a partnership between ThermoEnergy, based in Worcester, Massachusetts, and the major Italian engineering firm Itea. A version of it has been demonstrated at a small plant in Singapore that can generate about 15 megawatts of heat (enough for about five megawatts of electricity).

The technology simplifies the clean-up of flue gases; for example, some pollutants are captured in a glass form that results from high-temperature combustion. It also has the ability to quickly change power output, going from 10 percent to 100 percent of its generating capacity in 30 minutes, says Robert Marrs, ThermoEnergy's VP of business development. Conventional coal plants take several hours to do that. _TechnologyReview

Coal is a massive and affordable source of energy that is begging to be produced and utilised in a clean and responsible manner.

While everyone from gas advocates to nuclear advocates to green dieoff.orgiasts rail against coal as the mineral from hell, more responsible energy analysts understand that we will need to learn to utilise all sources of energy in clean and responsible ways, if we are to transition smoothly into the age of advanced nuclear fission and nuclear fusion.

Oil Dependency and the Russian Economy

Some say Russia's government requires oil prices of $120 a barrel to balance the budget, while others say the real figure is as high as $150 a barrel or more. Either way, Russia's economy is already feeling the pain of the recent global decline in oil prices. And there is no guarantee that the oil slump will end any time soon.

Financial Times

Oil dependency is seen as Russia’s biggest weakness.

This year’s budget needs an oil price of more than $120 a barrel to balance, lifting the non-oil deficit, the shortfall excluding oil and gas revenues, to 12.5 per cent of GDP. It was below 5 per cent before 2008.

...Oil prices would need to grow by $10 to $15 a year, he adds, otherwise the “budget will not be affordable”, forcing Russia to increase borrowing or reduce spending.

Economists have also warned that, with budgetary spending becoming a bigger contributor to growth, and that, in its turn, increasingly funded by oil and gas revenues, Russia is drawing too heavily on its energy wealth.

That drives up prices and costs, crowds out private sector investment and makes manufacturing uncompetitive, all classic symptoms of the so-called Dutch disease.

This hinders what should be its main policy aim: diversifying the economy away from reliance on extractive industries. _FT

Opinions are mixed over whether Russia's president Putin is serious about facing Russia's many structural problems. But opinions are like rectums: every athol has one.

What matters is whether wise and knowledgeable people are willing to place bets on Russia's future, under Mr. Putin, and whether the smart money inside Russia is staying inside Russia -- or is fleeing the country.

In fact, capital flight from Russia has recently been described as "torrential," and the brain drain of Russia's best and brightest to Europe, North America, and Israel continues.

Russia is desperate for foreign investment in order to maintain its role as an energy superpower. As noted in the chart above, China is a very big investor in Russia, but China lacks the state of the art energy technology which Russia needs. Which means that Russa -- under Putin -- will need to learn to "play nice" with some of the same large western energy companies which it has traditionally ripped off in the past by nationalising profitable energy assets, once developed.

There is a reason why large global insurers are reluctant to insure outside ventures and partnerships in Russia.

Putin is very ambitious, has made many promises, and aims to spend a lot of oil & gas money. Time will tell whether that money materialises in the quantities planned. If energy prices remain depressed for long, it will not take long for Russia to run through its cash reserves.

Worrying About a Collapse of Oil Prices

North American oil executives are becoming concerned that the same type of price collapse that occurred in the natural gas sector may also occur in the crude oil sector due to significant improvements in oil production technology.

Oil fundamentals today are showing very similar characteristics to natural gas a few years ago: A rapid increase in productive capacity; weak domestic consumption that can’t absorb the rising output; old takeaway infrastructure (for example, pipelines) that is not adapting quickly enough to match new sources of supply with shifting demand; and a fenced-in continental marketplace that inhibits exports to higher-value global markets.

Rapid production growth, the number one antagonist, continues to astound with every new data point received. From North Dakota to Alberta, Saskatchewan to Oklahoma, new light oil barrels from horizontally-fracked wells keep flowing in greater quantities every month. If there is one chart that turns this story into Technicolor, it’s Figure 1, the long-term production profile for Texas. _Globe&Mail

CAPP 2010 . . . Updated 2012 CAPP PDF

Canada is projecting sustained growth in oil production over at least the next 2 decades, largely due to growth of in situ oil sands production.

And as you can see below, Texas has reversed its long decline in oil production, and expects production to continue to grow for the near-term and intermediate-term.

Image Source

Texas is now growing its rate of oil output by 35,000 B/d, every month, for an annualized growth rate of 425,000 B/d per year! To put this in perspective, that’s the equivalent of one-third of Libya’s oil production developed and brought to market in 12 months. It’s also close to China’s incremental consumption in 2011 (505,000 B/d).

Here in Alberta, the production of light, tight oil, or LTO, is now up by 175,000 B/d relative to what would have been expected without the new technologies. Putting this in perspective, Alberta has built the equivalent capacity of a big oil sands project in less than 18 months – complete with an upgrader to light oil! _Globe&Mail

To say nothing of North Dakota and the Gulf of Mexico!

Carbon Sciences is showing progress in its unique "dry reforming catalytic technology" which makes economic use of otherwise useless high CO2 natural gas deposits. By using CO2 in the reforming of methane to syngas, Carbon Sciences opens up large deposits of otherwise stranded gas which would be impossible to make economic use of otherwise.

Carbon Sciences' technology allows for a wide range of uses for these newly available gas deposits, including GTL (gas to liquids), high value chemicals production, etc.

Widening the economic uses of natural gas -- both stranded and otherwise -- also puts downward pressure on oil prices, although few analysts or journalists up until now have taken the trouble to point out that important fact.

More: The Coming Oil Crash

Even More:The Most Dysfunctional US Energy Department in History?

German Magazine FOCUS Warns Germans of Collapse

The people of Germany are not entirely unaware of the destructive course of energy starvation which its green leaders have plotted for the nation. And certainly economic and industrial leaders of Germany are beginning to understand that German politicians have thrown the nation's economy into the end game.

Betting the entire future of Germany -- and Europe -- on one huge throw of the green die, Germany's faux environmentalist politicians and bureaucrats have committed a crucial error of leadership. Their radical energy policies have endangered the very basis of modern life in Europe.

FOCUS... warns that Germany’s once super stable power grid, once a model of stability and reliability, is now on the brink of collapse.

...FOCUS reminds its readers that the big price driver is not “greedy” power companies, but government taxes and surcharges, which make up a whopping 45% of the price of electricity. In 1998 the 80 million or so Germans paid about €2.3 billion for various surcharges, taxes etc. on electricity. Today that figure is more than 1000% higher: €23.7 billion!

Not only the costs have become major obstacles, but also the technical feasibility of renewable energies is missing, especially wind and solar, which lack the infrastructure elements for taking the power to the markets that need them. These elements include power transmission lines, back-up energy systems for when the sun isn’t shining and the wind isn’t blowing, and power storage systems.

...If next winter turns out to be a harsh one and the power fails and leaves citizens out in the cold, then there are going to be lots of angry people. Germany’s social powder is tinder dry.

...One year ago Germany, in a fit of hysteria, ordered 8 nuclear power plants closed immediately and the remaining 9 closed by the year 2022. By 2050 it’s energy supply must be at least 80% supplied by renewable sources – costs be damned.

This has come to be knows as the German Energiewende or “energy transition”, roughly translated. And so the mad rush to renewable energy was on in earnest. Today, just a single year later, the high costs and insurmountable technical problems (we warned them) have spooked leaders and sparked a wave of uneasiness to sweep over the country.

...A FOCUS survey found that 41% of Germans flat out reject paying one cent more for renewables. In East Germany, that number jumps to 52%. Only a small minority of less than 10% could imagine paying $25 a month more.

German leaders are spooked by the spiralling out-of-control costs and government seizure now spreading though the energy sector. _FOCUS as excerpted in NoTricksZone

The article then quotes a number of German leaders expressing dismay at the dangerous path of Germany's energy policy.

H/T Global Warming Policy Foundation

Energy Cornucopia in Paradise

Apache Corp. has discovered a massive natural gas field in British Columbia -- perhaps the largest discovery of gas on the North American continent. This discovery is just one of many, helping to hold the North American price of natural gas down. The planned Kitmat LNG terminal on the British Columbia coast is meant to ship this abundance of gas to more profitable Asian markets.

One of three companies planning a $4.5-billion liquefied natural gas terminal at Kitimat on Thursday announced an "outstanding" new shale gas discovery in British Columbia's remote and largely unexplored Liard Basin. The find by Apache Corp. is estimated to contain enough gas in itself to justify doubling the size of the Kitimat terminal it's proposing with partners Encana Corp. and EOG Resources. The company is calling it the best and highest quality shale gas reservoir in North America, based on the volume of gas three test wells are producing. Apache, the second largest U.S. independent oil and natural gas producer by market value, said the tests suggest it has 48 trillion cubic feet of marketable gas within its Liard Basin properties. By way of comparison, all companies active in the Horn River Basin, one of three other major shale gas basins that are in B.C., have marketable gas of 78 trillion cubic feet, giving one company alone a natural gas find that is twothirds the size of the entire Horn Basin. One well alone produced 21 million cubic feet of gas a day over a 30-day period, the company said. _Canada.com

Brian Westenhaus has more information and analyses.

Brian Wang is also keeping his eye on this discovery

Natural gas prices are very low in North America, due to very efficient methods of gas production, and due to a relative abundance of newly accessible tight gas.

But as natural gas is increasingly used to substitute for crude oil in a wide range of applications -- from transportation fuels to polymers to chemicals to LNG and more -- the cost of gas will rise with growing demand.

Pitiful Germany: Who Can Save You Now?

Germany intends to produce 40% of its electric power from big wind and big solar by 2020 -- and 80% of its power from big green by 2050. German politicians say it will work. They are betting the entire country on it. The cost of Germany's great energy experiment -- Energiewende -- has risen to upwards of $250 billion over the next 8 years. That is about 7% of Germany's 2011 GDP. Electricity costs are already going up, and German electricity consumers must pay a 15% renewable-energy surcharge tax with every monthly bill.

Germany's government is betting its industry and its economy that green energy technologists can somehow pull a herd of rabbits out of a thimble, and save the day. Pathetic Germany: Who can save you now?

In 2010, the German government declared that it would undertake what has popularly come to be called an Energiewende—an energy turn, or energy revolution. This switch from fossil fuels to renewable energy is the most ambitious ever attempted by a heavily industrialized country: it aims to cut greenhouse-gas emissions 40 percent from 1990 levels by 2020, and 80 percent by midcentury. The goal was challenging, but it was made somewhat easier by the fact that Germany already generated more than 20 percent of its electricity from nuclear power, which produces almost no greenhouse gases. Then last year, responding to public concern over the post-tsunami nuclear disaster in Fukushima, Japan, Chancellor Angela Merkel ordered the eight oldest German nuclear plants shut down right away. A few months later, the government finalized a plan to shut the remaining nine by 2022. Now the Energiewende includes a turn away from Germany's biggest source of low-­carbon electricity.

To some German economists, the country's energy policy is simply wrong-headed. Hans-Werner Sinn, president of the Ifo Institute for Economic Research at the University of Munich, is especially scathing. "The Energiewende is a turn into nowhere-land, because the green technologies are just not sufficient to provide a replacement for modern society's energy needs," he says. "It is wrong to shut down the atomic power plants, because this is a cheap source of energy, and wind and solar power are by no means able to provide a replacement. They are much more expensive, and the energy that comes out is of inferior quality. Energy-intensive industries will move out, and the competitiveness of the German manufacturing sector will be reduced or wages will be depressed." _TechnologyReview

The problems with Germany's plan are too many, too obvious, and too grave to dismiss. And yet that is exactly what Germany's politicians are doing, to the ultimate demise of the nation's industrial might and its economy. And when Germany goes, it will drag the rest of Europe down with it.

There is much about the current policy that arguably isn't logical. In the short term at least, the decision to close the nuclear plants means that the Energiewende will actually push utilities to rely more heavily on coal. Last year, for example, RWE fired up two long-planned new boilers at an existing facility near the Belgian border that burns the dirtiest fossil fuel of them all: brown lignite coal. Though these boilers are cleaner than the ones they're replacing, the coal plant is the largest of its kind in the world, and it's going full blast these days to keep up with power demand.

...Inevitably, some hot July week will come when a high-pressure system stalls over Europe, stilling turbines just when sunburned Germans reach for their air conditioners. Until large-scale, cheap storage is available, gas power plants, which can start up quickly and efficiently, will be the most practical way to cope with these situations. But there's little incentive to build such plants. Owners of gas plants meant to meet peak power needs can no longer count on running for a certain number of hours, since the need will no longer fall on predictable workday afternoons but come and go with the sun and wind. Says ­Ottmar ­Edenhofer, chief economist at the Potsdam Institute for Climate Impact Research, "The design of the electricity market will change fundamentally. You have fluctuating demand, and at the same time a fluctuating supply. The linkage and the interplay in these two dimensions has become the subject of intense research. There could be new and emerging market failures." _TechnologyReview

Market failures? Certainly. But more importantly, power failures. As power blackouts and cascading failures become more common across Germany -- and thus across Europe -- Germans will find themselves immersed in the true experience of big green: Freezing or roasting in the dark.

Without enough cheap, reliable power to support the high-technology industry and the transportation system, Germany's economy—and that of Europe as a whole—could be in trouble. Already some German firms are building new manufacturing facilities elsewhere; for example, last year the chemical producer Wacker ­Chemie decided to build a polysilicon plant in Tennessee, partly because energy costs in Germany were so high. Weale says, "The quality of the supply would only have to deteriorate a little bit and it would be quite serious for this high-­technology industry. We've already seen, even without the lights going out, that industry is getting nervous." _TechnologyReview

Not long ago, German politicians were talking about having to spend $25 billion on new power infrastructure to facilitate new offshore wind installations and new solar power plants. Now, they are talking about up to $250 billion -- a significant portion of German GDP.

But in reality, German economists admit that no one knows how high the ultimate cost of the Energiewende will grow to be.

And in the end, what will Germany have? A former economic powerhouse of Europe, reduced to dependency upon intermittent unreliable forms of energy. A nation in demographic decline, stripped of its most profitable industrial producers -- because these producers could not depend upon Germany's power supply.

Rarely has a nation gone through the rapid ups and downs that Germany has undergone over the past century. It is not certain that the much depleted German character can survive the next collapse.

The Lesson of $147 a Barrel Oil

Peak oil doom theories are falling out of favour among the smarter set of investment bankers and energy analysts. While doomers took the lesson of $147 a barrel oil to mean that peak oil doom and civilisational collapse were right around the corner, smarter people decided to sit back to watch and see what would happen on a longer time scale than the doomers' typical 30 seconds of attention span.

Lo and behold, $147 oil brought a lot of ideas and technologies out of the woodwork.

That is the lesson of $147 oil. It propelled shale oil technology and drilling more rapidly than anyone expected. And if you top off shale oil technology with the arrival of more fuel-efficient car technology, ditto on the possibility that oil prices will moderate over time. Experienced futures brokers like Andrew Lebow of Jeffries Bach agree: Shale is already taking the wind out of the sails of long-term oil futures prices. _NYT

As in past decades, technology is increasingly upending fears of impending oil scarcity, causing the costs of unconventional oil and gas development to fall dramatically. Indeed, the technology costs of converting one form of hydrocarbon to another and the costs of providing alternative automotive engine technologies are also likely to fall. So I feel at peace with my original contention that, in the long run, oil prices are cyclical, and that high prices invite the creation of new technologies, ensuring that the upswing of the cycle is eventually followed by the downward slope.

...With the shale oil boom promising over one million barrels a day of new oil production within a year in the United States, analysts are coming out of the woodwork to embrace falling oil prices. The new word on the street when it comes to oil is “sell.” Already, the long oil price, that is, futures prices going out past a year, has fallen to $85 a barrel, down from over $100 a barrel earlier this year.

Citigroup Global Markets took the lead last week with predictions of a cyclical shift that could cause prices to slide in the long term to as low as $50 a barrel. In their latest publication, “Zeroing In On the Long-Term Oil Prices,” Citi analysts state: “Signs are abounding that the escalation in upstream capital spending is bearing fruit, with a surge in discoveries and reserve bookings that is already being converted into new production, particularly in North America.

“There are no reasons to believe the supply boom in Canada and the United States is about to end,” they write. “To the contrary, it appears likely to start spreading across the world.” _NYT

It is best not to assume that shale oil & gas will be the most revolutionary energy technology of this decade. There are likely to be other surprises in store which will overshadow tight oil & gas technologies, in terms of expanding available energy supplies. It is only a question of when.

Peak Oil Stutters, Stammers, Blusters On

Everything You Think You Know About Peak Oil Is Wrong
Oil reserves continue to grow year on year for a number of reasons. New technology has placed several large sources of oil within the reach:

1. Increasingly large amounts of oil from "depleted wells" can suddenly be produced due to better extraction technologies.
2. Much more oil under the deep sea is being discovered, and is becoming more economical to produce.
3. Multiple large deposits of tight oil which were previously difficult or impossible to produce, are now producible using new technologies.
4. As the price of oil remains inflated, the incentive to develop new technologies and new oil fields expands -- particularly in view of largely stagnant economic activity in other sectors.
5. More efficient and economical methods of producing and substituting liquid fuels from unconventional sources such as natural gas, coal, biomass, kerogens, bitumens, and gas hydrates, expand the liquid fuel base
6. Increasing substitution of natural gas in place of crude oil in chemicals, plastics, fuels, fabrics, and more create a de facto expansion of "oil reserves"
7. The effect of mass production of highly efficient, economical, and safe, scalable new generations of nuclear power, will facilitate a massive and ecnomical substitution of CTL, GTL, BTL, etc. in place of petroleum.

As you can see below, the price of oil has been unbelievably stable over the past 50 years when measured in gold -- as opposed to the US dollar, which is constantly losing value.

What Peak Oil?

The oil in the ground will run out some day. But as the discovery of proven reserves continues to significantly outpace the rate of extraction, the claims that we’re facing immediate shortages looks trashy. _What Peak Oil?

Here is more from Leonardo Maugeri:

First, oil reserves are finite. This is incontrovertible. But even so, no one knows how finite they are. And since we don't know the total amount of oil resources existing underground, it's impossible to calculate the curve of future supply.

The inadequate data we rely on today are from the U.S. Geological Survey, and put the stock of conventional oil resources at least seven to eight trillion barrels. More than two trillion of these are currently deemed to be recoverable, while "proven" reserves are around 1.2 trillion barrels. (The world consumes around 30 billion barrels of oil per year.)

Unconventional oil resources (including ultra-heavy oils, tar sands, shale oils, etc.) may equal the amount of conventional ones, thus doubling the overall figure.

Yet, the concept of resources and reserves is dynamic. Throughout history, new exploration and the development of new technologies have allowed to discover new oil frontiers and to develop them. What's more, the U.S. Geological Survey's figures may well be underestimated. In spite of the one trillion barrels of oil that we have already consumed, the total available reserves continues to grow.

Second, new technologies allow us to extract much more oil than initially assumed. Today, we recover on average less than 35% of the oil contained in known fields, up from 20% in 1980. Even the most mature oil country, the United States, still holds huge volumes of unexploited oil underground. Although the country's proven oil reserves are now only 29 billion barrels, the National Petroleum Council (NPC) estimates that 1.124 trillion barrels are still left underground, of which 374 billion would be recoverable with current technologies. _WSJ

Peak Oil: Pro and Con

Pro: Peak Oil is Happening and Oil Will Cost $180 a barrel by 2020

The IMF model predicts that growth in demand will put continual upward pressure on price, with the inflation-adjusted price of oil headed for $180/barrel by the end of the decade. According to their estimates, those price increases would be sufficient to keep global production increasing at about the same reduced rate we have seen since 2004.

...The IMF team propose modifying the Hubbert-Deffeyes model to allow for a response of supply to the price of oil, where higher oil prices will (with a lead time of 4-6 years) stimulate higher production levels. They combine this with a traditional model in which demand for oil depends on growing GDP and the price of oil. The model strikes a compromise between the EIA and Hubbert-Deffeyes approaches, and has a better track record than either in simulated out-of-sample predictions over the last decade. _James Hamilton

The IMF working paper (PDF) which predicts oil prices in constant 2011 US dollars to rise to $180 a barrel by the year 2020.

Image Source _ taken from IMF Working Paper PDF

Con: Why We'll Never Run Out of Oil

The notion that world oil production had reached its summit and would soon begin a decline -- bringing with it shortages, economic collapse, resource wars, and general ruination -- was in vogue not so long ago.

"Is global oil production reaching a peak?" asked the BBC in 2005. "We are approaching peak oil sooner than many people would have guessed," said The Houston Chronicle three years later. Two years after that, The New York Times reported on a group of environmentalists who "argue that oil supplies peaked as early as 2008 and will decline rapidly, taking the economy with them."

Government agencies also bought into the idea. In 2010, the U.S. Joint Forces Command warned that "by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day." Just this spring, seemingly every other report warned that $5-a-gallon gasoline -- or worse -- was just around the corner, and certainly would arrive by summer.

Well, here we are at summer, 2012. The Chicago Tribune reports that the nationwide price for a gallon of regular "has fallen well below $4 a gallon." The term "peak oil" seems to have been completely forgotten. Not only that -- it is beginning to look as though the U.S. could largely cease to depend on the Middle East as its principal supplier.

The Washington Post reports that U.S. imports from OPEC countries have declined by 1.8 million barrels a day. Last year the top American source of crude oil by far was Canada, which supplies 29 percent of U.S. imports. By contrast, the No. 2 supplier, Saudi Arabia, supplies only 14 percent. "Production has risen strikingly fast in places such as the tar sands of Alberta, Canada," The Post says, "and [in] the 'tight' rock formations of North Dakota and Texas -- basins with resources so hard to refine or reach that they were not considered economically viable until recently. Oil is gushing in once-dangerous regions of Columbia and … Brazil."

But that's not all: "A host of new discoveries or rosy prospects for large deposits also has energy companies drilling in the Chukchi Sea inside the Arctic Circle, deep in the Amazon, along a potentially huge field off South America's northeast shoulder, and in the roiling waters around the Falkland Islands."

So what the heck happened? It's no great mystery. As supplies tightened and prices rose, producers were motivated to find new sources and develop new technologies. When you hear that only X trillion barrels of "recoverable reserves" of oil exist, remember: The term does not refer to all the oil that there is. It refers to those reserves that are neither too costly to tap at present, nor off-limits because of government policy. Both of those factors can change. _Alaska Dispatch

In a sense, both the "pro" and the "con" viewpoints are looking at much the same phenomena, and seeing a different future based upon what they see.

Both the IMF and Barton Hinkle clearly see that the Hubbert - Deffeyes - Campbell predictions of peak oil have failed. And both "pro" and "con" viewpoints perceive that higher oil prices lead to greater production of oil -- for various reasons.

And, interestingly, both viewpoints comprehend the eventual physical limits to large scale oil production -- the finite nature of the oil resource.

But, the IMF group thinks that there will be no valid substitutes for crude oil, so that as demand for energy rises, the price of oil will inevitably rise along with it. Barton Hinkle, on the other hand, thinks that ingenious humans will devise economical substitutes for crude oil which will allow economies to move relatively smoothly from one energy source to another.

Economist James Hamilton judges the IMF paper to be a useful -- but imperfect -- look at future oil prices:

My view is that the IMF researchers’ approach is clearly better than the simple Hubbert-Deffeyes linearization, but may still be subject to some of the other problems documented by Boyce (2012), as well as the familiar challenges of statistically distinguishing supply and demand effects. Notwithstanding, the IMF research should help raise awareness of an issue that remains underappreciated by many economists, which is that we will eventually reach a point, and may have already, at which quite significant increases in price and improvements in technology can produce only modest increases in production, or may be insufficient to prevent outright declines in annual crude oil production levels. _James Hamilton

In other words, both Hamilton and the IMF group think that we will see a "peak supply" in oil production before we see a "peak demand."

Barton Hinkle believes that we will see "peak demand" first, as a result of incoming substitute energy sources which become more economical than the most expensive sources of crude oil.

Al Fin energy analysts feel that whether we see "peak supply" first, or "peak demand," depends entirely upon political decisions being made in global governments and inter-governments. Political peak oil has always been a possibility, if governments and inter-governments prohibit the development of a wide range of economical energy sources.

But if humans can develop cleaner, safer, more affordable gen III and gen IV + nuclear reactors at all scales -- which burn 99% of nuclear fuel instead of the approx. 2% currently utilised -- the entire calculus of global energy balance suddenly changes. Particularly with the coming of an unconventional liquids boomfacilitated by high temperature industrial process heat from HTGRs -- which demolishes the EROEI boogeyman.

World Coal Demand Growing Fastest of All Fuels: BP Statistical Review of World Energy 2012

This article was first published on Al Fin blog

The 2012 BP Statistical Review of World Energy is now available for download. It reveals that worldwide demand for coal is growing significantly faster than worldwide demand for crude oil. And that is just the beginning.

BP via GCC

Oil demand grew by less than 1%—the slowest rate amongst fossil fuels—while gas grew by 2.2%, and coal was the only fossil fuel with above average annual consumption growth at 5.4% globally, and 8.4% in the emerging economies.

...Emerging economies accounted for all of the net growth, with OECD demand falling for the third time in the last four years, led by a sharp decline in Japan. China alone accounted for 71% of energy consumption growth.

...Fossil fuels still dominated energy consumption with 87% market share, while renewables rose fastest but are still only 2% of the global total. The fossil fuel mix continues to change with oil, the world’s leading fuel at 33.1% of global energy use, losing share for 12 consecutive years. _GCC

In North America, natural gas is increasingly replacing coal for purposes of electrical power generation. As global natural gas prices decline, the same type of substitution should be seen in other areas which benefit from large scale tight gas deposits.

Worldwide, however, coal should continue to be in high demand for power generation and other industrial uses.

Renewables such as big wind and big solar continue to be less than impressive, as predicted. Intermittent unreliable sources of energy cannot be depended upon. No wonder a significant part of China's installed wind power capacity continues to lack connections to any power grid. I suppose the capacity looks good on paper, even if it isn't doing anything but sit and rust.

BP Statistical Review of Energy 2012 Download PDF