Wednesday, June 06, 2012

H2BiOil vs. IH2: Can Pyro-Biofuels Set a Ceiling for Oil Prices?

Two approaches to hydropyrolysis + hydrodeoxygenation are attempting to set a practical price ceiling for how high petroleum prices can go on a free and open market. The first promoter of this technology was GTI / CRI, with their IH2 process (PDF). And now, Purdue chemical engineers have developed their very similar H2Bioil process, which they claim will be competitive with petroleum at a price of $99 to $116 a barrel.
The Purdue University-developed fast-hydropyrolysis-hydrodeoxygenation process for creating biofuels—H2Bioil (earlier post)—could be cost-competitive when crude oil prices range from $99 to $116 per barrel, depending upon the source of hydrogen, the cost of biomass and the presence or absence of a federal carbon tax, according to a new study by the Purdue team. Their analysis is published in the journal Biomass Conversion and Biorefinery.

H2Bioil is created when biomass, such as switchgrass or corn stover, is heated rapidly to about 500 °C in the presence of pressurized hydrogen. Resulting gases are passed over catalysts, causing reactions that separate oxygen from carbon molecules, making the carbon molecules high in energy content, similar to gasoline molecules. _GCC
More at the link above.

The Purdue chemical engineers are on the right track, but being academics rather than businessmen, they are not likely to be first to achieve a competitive marketable product. The GTI IH2 development team involves scientists, engineers, industrialists, and technologists who are involved in business, industry, commerce, government labs, and university labs. With its head start and broader development base, it is likely that the IH2 team will see daylight first.

What about the price target -- around $110 to $120 a barrel? As a price ceiling for oil, that is an acceptable target. But it is unlikely to be reached on a permanent basis for a long time -- long after hydropyrolysis + hydrodeoxygenation have become mature technologies. In other words, unless these teams can adjust their target price downward by 20% to 30%, they will not likely be competitive in fuels production for a few decades yet.

The reason for this unanticipated delay in the profitability for advanced pyrolytic biomass to fuels processes is the abrupt and ongoing global expansion of natural gas production. Natural gas can be converted to liquid fuels, high value chemicals, polymers, lubricants, fertilisers, etc etc more economically than can biomass. This is likely to remain true for the next few decades. The same is true for coal, and will eventually be true for gas hydrates -- the most vast hydrocarbon resource available on the planet.

What about those who claim that the Earth cannot produce enough biomass to provide all the liquid fuels needed by modern societies? Such people are clearly missing the point, and do not understand the economics of competing resources and products in the marketplace. Biomass to liquids (BTL) does not have to totally replace all other liquid fuels. It only has to be able to replace enough of them -- economically -- to make a difference in prices. How much BTL capacity would be needed to provide a price ceiling for petroleum (and GTL, CTL, KTL, etc) prices?

That depends upon how easily the BTL product can be moved onto global markets. The recent North American shale experience reveals how regional energy markets can become, if the product cannot be easily shipped onto the global markets.

If BTL producers had the ability to add 10% of current global liquids production to global markets, they could take the air out of most any oil price bubble. The ability to add 20% of current production to markets would come close to placing a cap on oil prices -- if the product was globally available. An additional 30% production volume over current production should be more than enough to constitute an oil price ceiling, particularly given current trends toward peak demand. But realistically, as GTL, CTL, KTL, BitTL, GHTL, etc. expand, they will set price ceilings of their own -- singly and in combination, as they become available over time.

Over the next 20 years, the widespread availability of gen IV HTGRs will facilitate the movement to unconventional liquid fuels -- and the placing of a solid price ceiling on oil.

To repeat: BTL is unlikely to be able to compete with GTL, CTL, BitTL, and KTL and GHTL, for the next few decades. But unlike fossil fuel resources -- vast though they may be -- biomass can be grown year after year, for billions of years yet. Some crops such as micro- and macro-algae produce several harvests per year.

Robert Rapier recently pointed to a study showing that advanced pyrolysis of biomass represents the most cost-effective form of biofuels production, at this time and in the foreseeable future. That is good to know, and we certainly need to proceed in developing such technologies -- so that they will be ready when they are needed.

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