自業自得 Just desserts

High oil prices and the desire to reduce energy dependence in the United States – so where is the coal-to-liquid (CTL) discussion about alternative fuel sources?


Nearly 100 years old, CTL processes have long been used by countries lacking access to oil, most notably Germany, where production peaked during the 1940s; South Africa, which has been using CTL technology for fuel since the 1950s; and, more recently, China, where the Shenhua Group LLC began trial operation of the world’s first direct CTL facility in December 2008, and intends to eventually produce 1 million tons of coal-based liquid fuel a year.

The U.S. Government promoted the development of CTL technologies following the oil shocks of the 1970s, but shelved the projects after the price of oil fell during the 1980s. In the current economic and political environment of the United States, with oil prices surpassing $90 per barrel and generally projected to rise in the long term, synthetic fuel derived from coal is once again become economically viable, and several projects are in the initial design phase around the country.

From an environmental standpoint, however, the carbon dioxide (CO2) emissions produced throughout the lifecycle of coal-based liquid fuel make it a less desirable option.

In terms of economics, coal-based liquid fuel becomes viable when the per-barrel price of oil exceeds the $45-50 range, according to separate studies. This is because of high front-end expenditures—a 10,000 barrel-a-day plant could cost $600-700 million and $6.5 billion for a world-scale 80,000 barrel/day plant with a five-seven year lead time.

All told, the refinement process is three to four times more expensive than refining an equivalent amount of oil. When biomass is mixed with coal, the process becomes even more expensive, and is only viable with oil prices above $90 per barrel, according to the Department of Energy.

Not included in the above estimate is the cost of sequestrating the captured CO2, which would increase the price of the end product by a projected $5 a barrel. The imposition of a strict carbon cap and trade regime would also raise the cost of fuel produced with CTL technology, because of the CO2 emissions associated with it. While there is significant uncertainty, a RAND study estimated that CTL production plus carbon storage could produce fuel at a cost of anywhere from $1.40 to $2.20 per gallon.

The same RAND study found no difference between CTL and petroleum emissions, and a Department of Energy study found that CTL emissions with sequestration were actually 5-12% lower.

Four companies for coal-based synfuel: Headwaters (NYSE: HW), Syntroleum Corp (NASDAQ: SYNM), and Rentech (AMEX: RTK) and . South African company Sasol (NYSE: SSL)