Wanted to start a threat on the potential for coal to liquid technology. It is an area of great potential with huge pitfalls. What I understand about it is the following:
- traditionally the fuel generated is of a lower octane
- the process can be very dirty, with huge amounts of off waste
- the fuel itself is cleaner as has a low sulphur content
- it's non-viable with oil below $50
- there's uncertainty around how it will be affected by the cap and trade, as it has high emissions in the production phase.
I have found a few interesting companies:
Sasol, pretty much the most established
Syntroleum Inc, which licenses out the process but does not have a plant
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Rentech Inc, which seems to be putting all it's eggs in the basket with Tyson foods and the US military converting organic fats into jet fuel (which sounds ghastly)
Linc Energy plc, an Aussie company, using Syntroleum technology.
What I can see is that the US names have all been trading much much higher and seem to be burning through cash with little to show. Clearly, the price of oil has had an effect and governments seem to be putting their weight behind wind, nuclear, ethanol etc.
Is the technology all hype?
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I am sure you know this but, amusingly, the underlying process for Coal Liquefaction was developed by German researchers Franz Fischer and Hans Tropsch back in 1923 and was apparently used by Germany and Japan in WII to overcome their limited access to oil. Later, during apartheid, in South Africa, coal liquefaction helped to make up for the loss of crude oil due to sanctions.
Seems to be a technology that only makes sense in times of extreme oil scarcity, but maybe there are new developments that have changed this? Also seems very, very dirty in the production process - what will Obama say? :-)
http://thefraserdomain.typepad.com/energy/2005/07/about_coal_liqu.html
http://en.wikipedia.org/wiki/Coal_liquefaction
http://peakoildebunked.blogspot.com/2005/08/43-coal-liquefaction.html
Sasol have an interesting JV with Shenhua Ningxia Coal Industry which will begin construction next year : http://www.tradingmarkets.com/.site/news/Stock%20News/2381860/
In reply to Betasurfer (post #1)
Interesting fact on this topic, the Messerschmitt me109 actually had a higher performance engine that the Merlin in the Spitfire, but because of the lower octane fuel made from coal, the performance was much worse at higher altitude.... and we know the rest.
The Rentech/ Tyson project is interesting, basically using inedible fats from food processing to make jet fuel for the US military, but I don't see this as a potential cash cow.
I was thinking about the Chinese angle, but given how scarce the higher grade coal is, the environmental issues with converting lignite to liquid may be even worse, if that matters to them?
As for the US angle, I suppose the question is not how profitable it would be, but how much government support it might get.
It strikes me there has been plenty of "pump and dump" noise around the US names, if you bought during IPO you have lost most of your money, and they are low on cash, but I just don't see this technology going away.
Further on CTL, I would add that China started its first CTL production plant this year using, if I remember correctly, a Shell gasifier to convert the coal into syngas for feeding to the FT process.
There is much discussion of possible improvements in the technology - the Chinese are very active.
Also Sasol has a JV with Chevron to market their CTL technology
A key issue (apart from the wastes and the amount of water used by the process) is the cost - the breakeven price level with conventional crude is not fixed but rises with the cost of oil because so much of the equipment (as well as the fuel) varies in price with the price of oil. Thus $50 may be the breakeven level as pointed out above but at what POO? I suspect if oil went up to $140/bbl again, the breakeven would be higher but not by as much.
More on Chinese projects in the following link
http://www.upstreamonline.com/live/article156260.ece
Given vehicle sales the first half of the year increased by 18% yoy, this may be less than 1% of demand by 2020...
There is a load fo stuff on net to read about this process of converting coal to liquid hydrocarbons
http://ergobalance.blogspot.com/2007/02/electricity-from-coal-and-oil-too.html
For the grade of coal used in the study, roungly 1.4 barrels liquid fuel can be obtained from 1 tonne of that coal studied. (and lots of elctecricity, 80 kw/tonne from the coal used in the study) with thermal efficiency of 52%. CO2 disposal is a big problem and capital costs of equipment is also very high. Hence economics need reasonably high oil prices or at least >$40/bbl to provide potential competion to oil as a source of conventional (Diesel, Kerosene, Naphtha blends for petrol) transportation fuels.
Unless costs tumble I would say $50 to $60/bbl is the real competing price. In any case for USA and other coal convesion to liquids is more strategic and projects might get assistance via subsidies to make the economics work.
Once the CO2 disposal issue are dealt with and marketed/sold properly then I think that this technology definitely seals the future of the ICE (interal combustion engine), at leats for another generation.
JPGH
The best company in this space IMHO is Carbon Energy (ASX:CNX). They're not just CTL either, first commercialisation will likely be SNG (Synthetic Natural Gas) which will plug into the Queensland LNG infrastructure.
Their technology is UCG (Underground Coal Gasification), which basically part burns the coal underground to produce syngas. This produces much less CO2 and other crap than gasifying the coal above ground. They also have a tie up with an Australian government funded CCS outfit. So all bases are covered ...
http://www.carbonenergy.com.au
Some more Aussie stocks with a potential CTL involvement. The lucky country is really leading the world on this.
If you want some galactic optionality take a look at CTP. They have around a trillion tonnes of coal which might (might) translate into the same number of barrels of fuel.
Blackham Resource (ASX:BLK)
Cougar Energy (ASX:CXY)
Central Petroleum (ASX:CTP)
Gulf Resources (ASX:GLF)
Linc Energy (ASX:LNC)
Strike Oil (ASX:STX)
Syngas (ASX:SYS)