CTL The Coal-To-Liquids Imperative For Australian Fuel Security

Transcription

1 CTL The Coal-To-Liquids Imperative For Australian Fuel Security 1

2 CTL 1. World Oil Supply Outlook 2. Australia s Deteriorating Liquid Fuel Security 3. Refinery Closures 4. The CTL Solution 5. Climate Is Not A Problem 6. Summary 2

3 World Oil Supply Outlook The most successful economic prediction ever made: Date of Hubbert s prediction King Hubbert predicted in 1956 that US oil production would peak in

4 World Oil Supply Outlook This is the cheap stuff - does not include shale oil, tar sands, natural gas liquids. 4

5 World Oil Supply Outlook 5

6 World Oil Supply Outlook World Oil Production less US Production Outside the US, production has been in decline. 6

7 World Oil Supply Outlook Production from the majors has been shrinking: Down 17% since Source: 7

8 World Oil Supply Outlook Historic oil price: 8

9 CTL World Oil Supply Outlook The recent oil price and the return on substitutes: 9

10 CTL World Oil Supply Outlook The current energy landscape 10

11 CTL World Oil Supply Outlook Diesel is the best fuel possible. 11

12 CTL Our Biggest Imports Crude Oil and Refined Products are Australia s biggest physical imports - A total of $41 billion in Equivalent to 525,000 jobs at average weekly earnings. 12

13 Australia s Deteriorating Liquid Fuel Security Australia s production of oil and condensate is forecast to decline from 147 million barrels in 2014 to 83 million barrels in In 2014, Australia imported 169 million barrels of oil and 132 million barrels of refined products. This equated to 465,000 barrels per day of oil and 361,000 barrels per day of refined products for a total of 826,000 barrels per day. Source: 13

14 Australia s Deteriorating Liquid Fuel Security 14

15 Australia s Deteriorating Liquid Fuel Security Two Choke Points: Straits of Hormuz for Oil Straits of Malacca for Refined Product 15

16 Australia s Deteriorating Liquid Fuel Security The Need: What Australia Burns Monthly 16

17 Refinery Closures Even if we had our own oil production, we can t refine it anymore. 17

18 Refinery Closures From: Australia is drifting towards a situation, where in the event of a fuels emergency, there could be serious shortfalls in the supply of liquid fuels to the eastern seaboard and to critical sectors of the economy. This situation is exacerbated by the move away from crude oil refining in Australia and an increasing reliance on imported finished fuels. Current crisis management methods are considered inadequate as they primarily assume a ninety day stock of crude oil and the ability to refine it. International agreements are unlike to help as they, on the face of it, concern crude oil supply and without refineries there are no means of producing finished fuels. Neither do we have the tankage to hold 90 days of stocks. 18

19 Refinery Closures Taxes of $0.50 per litre equate to $80 per barrel. 19

20 Refinery Closures Stocks in terms of days of consumption cover Petrol: Aviation Turbine Fuel: Diesel: 20 days 18 days 17 days We are living on a hair-trigger in maintaining supply. There are localised shortages of diesel due to bad import batches. Given the global oversupply of refining capacity combined with declining conventional oil production, no amount of wishing or hoping or endless tears will bring our refining capacity back. 20

21 Refinery Closures Source: Australian Institute of Petroleum 21

22 Refinery Closures That a temporary hitch involving a relative minor player in the market led to the embarrassing rationing of fuel to international airlines with almost no notice clearly points to a problem. 22

23 Refinery Closures One day we will run out of oil; it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day. Fatih Birol, Chief Economist of the International Energy Agency 23

24 Refinery Closures Two Problems 1. After four decades of being largely self-sufficient in liquid fuels, Australia is now becoming highly exposed to potential supply disruption, with potentially catastrophic consequences for the economy and national security. 2. The trade deficit is going to balloon out. 24

25 Refinery Closures Binary Outcome Either: Australia continues as is with potential for enormous economic disruption from supply squeezes and a ballooning trade deficit. Or: Australia installs Coal-To-Liquids capacity, insulates itself from supply disruptions and generates a large amount of company tax and other taxes in the process. 25

26 The CTL Solution The Virtues of Coal-to-Liquids 1. CTL will make Australia impervious to oil supply disruptions. 2. CTL will stop an enormous blow out in the trade deficit. 3. The capital cost per annual barrel of capacity is about A$400/barrel. 4. Backing out 800,000 BOPD of imports by 2025 at US$200/barrel will result in $17 billion of company tax being paid (and PAYE tax, GST and all the other taxes). 5. Distributed diesel and petrol production will contribute to fuel supply security. 6. CTL can operate at very high ash levels. 7. It doesn t require the customer to adapt to a new fuel. 26

27 The CTL Solution A Brief History Direct liquefaction of coal (Bergius process) and indirect (Fischer-Tropsch process) developed in Germany early last century. Large scale development in South Africa from the 1950s. The US built a large scale coal to methane plant in North Dakota in New burst of activity in China in the last ten years 20 coal conversion projects were approved in CTL production will rise to 1.1 million barrels per day by 2020, requiring 180 million tonnes of coal per annum. China also has 20 coal to methane projects in train which require a further 200 million tonnes of coal per annum. 27

28 The CTL Solution The Australian Transport Fuel Market by Region The 6.0 billion litre per annum Queensland diesel market equates to 100,000 BOPD. 28

29 The CTL Solution FT Process Route Outline 29

30 The CTL Solution FT Process Route at 10,000 BOPD 30

31 The CTL Solution 31

32 The CTL Solution Capital Expenditure for a 10,000 BOPD US CTL Plant in

33 The CTL Solution FT Plants can make diesel out of coal that is too low-grade to export, and even too low-grade for power stations. Zao Zhuang New Gas Company Produces 90,000 tonnes per annum of methanol Proven successful operation on waste coals with ash content of up to 55% 33

34 The CTL Solution Capital Intensity per Motorist Capital intensity is $400 per barrel of annual production. A car doing 20,000 km per annum at 10 km per litre would consume 2,000 litres, which is 12.6 barrels. The capital cost of that would be $5,000 per vehicle. For a vehicle costing $25,000, that would be equivalent to 20% of the cost of the car. The CTL plant will last a lot longer than the car. 34

35 The CTL Solution Two Main Paths to CTL Products: Fischer Tropsch (FT) FT produces every molecule from methane to heavy waxes. Half of production needs to be cracked to smaller molecules in the diesel range to be saleable as liquid fuels. The refining step requires a scale of the order of 50,000 barrels per day. FT is necessary to produce diesel and jet fuel. Methanol To Gasoline (MTG) Developed by Exxon, this process turns coal into petrol using a zeolite catalyst. It can t make molecules larger than 10 carbon atoms but produces 80% on-specification petrol, with the balance being LPG and minor methane. Plants have been as small as 2,500 barrels per day. Therefore minimum diesel and jet fuel requirements need FT production and the balance of petrol needs can come from MTG plants. 35

36 The CTL Solution The spectrum of molecules produced by three catalysts by carbon number and compared to Arabian light crude. LTFT is preferred due to its high conversion efficiency. 36

37 The CTL Solution LTFT MTG Methane 4 % 2 % LPG and Ethane 8 % 11 % Petrol 18 % 87 % Diesel 19 % Oil and Waxes 51 % LTFT: Low Temperature Fischer Tropsch MTG: Methanol to Gasoline FT diesel has an specific gravity of about This is well short of the Australian specification of 0.82 to The Australian diesel specification will have to be rewritten for FT diesel. Synthetic fuels have zero sulphur and much lower NOX emissions. Due to its zero sulphur, FT diesel will require addition of a lubricity agent. Petrol from the MTG process is exactly within the petrol specification. LPG can partially substitute for diesel in diesel engines. 37

38 The CTL Solution Combined diesel and jet fuel consumption of 130,000 bpd. This requires FT syncrude production of 195,000 bpd. That would produce 35,000 bpd of petrol. Unmet petrol demand of 35,000 bpd would be met from MTG plants. Half of FT syncrude could go to the Lytton refinery. The other half could be produced in Central Queensland. 38

39 The CTL Solution Combined diesel and jet fuel consumption of 134,000 bpd. This requires FT syncrude production of 201,000 bpd. That would produce 36,000 bpd of petrol. Unmet petrol demand of 70,000 bpd would be from MTG plants. Given that NSW has no refineries, two FT plants of 100,000 bpd each in the Hunter Valley in the centre of mass of NSW consumption. 39

40 The CTL Solution Current Victorian refining capacity exceeds consumption by 50,000 bpd. There is no guarantee that either refinery will remain open. Victorian oil and condensate production is about 30,000 bpd. Combined diesel and jet fuel consumption is 76,000 bpd. This requires FT syncrude production of 100,000 bpd. This would leave unmet petrol demand of 60,000 bpd. Lignites from the Latrobe Valley could produce 60 billion barrels of synthetic fuels. 40

41 The CTL Solution Tasmania is too small a market for diesel and jet fuel production. The market could support petrol production in the range of 5,000 to 10,000 bpd. Forestry waste and biomass of 3 mtpa could produce 5,000 bpd of petrol. 41

42 The CTL Solution Diesel and jet fuel consumption totals 31,000 bpd. This requires FT syncrude production of 47,000 bpd. That would produce 8,400 bpd of petrol. That would leave 14,000 bpd of petrol demand that would be met by MTG plants. 42

43 The CTL Solution The WA fuel market equates to the size of the Kwinana refinery though some demand in the north of the state is met by barge from Singapore. WA has oil and condensate production centred 1,400 km north of Kwinana. WA could take of the order of 50,000 barrels per day of FT syncrude to Supplement domestic oil production. 43

44 The CTL Solution Coal production to feed these plants would increase Australia s coal production by 50% and employ a further 27,000 people directly and 70,000 indirectly. 44

45 The CTL Solution 45

46 Climate is not a problem. Carbon dioxide is tuckered out as a greenhouse gas. 46

47 Climate is not a problem. Solar-driven cooling is coming. 47

48 Climate is not a problem. The pure CO2 stream is a valuable resource - Algal growth for many species is optimised at around 10% CO2 compared to the atmospheric content of 0.04%. - Each barrel of diesel produced has 200 kg of CO2 as a byproduct. - This will make 100 kg of algae. - Which in turn will yield 0.34 barrels of biodiesel. - A 10,000 barrel per day plant could make a further 3,400 barrels per day of biodiesel. - This is a big potential increase in the project fuel yield. 48

49 Climate is not a problem. Water use is insignificant. Growing sorghum under irrigation requires 1,000 tonnes of water to yield one tonne of grain worth $200. By comparison, through a CTL plant it takes four tonnes of water to produce one tonne of diesel worth $940. The revenue yield of water is 1,200 times greater through a CTL plant than it is through grain. 49

50 Let s have what China is having. Why should Australia deny itself what China is having?: The total amounts to 783,000 barrels per day. 50

51 Coal to Distance At 2 barrels to the tonne, one tonne of coal produces 318 litres The Mazda 3 has a fuel economy of 17.5 km to the litre. Thus one tonne of coal will fuel a Mazda 3 for 5,580 km. 51

52 Energy Shortages Let s Not Go Third World Pakistan s spasms this week are a reminder that energy shortages can present almost as big a risk to government stability as higher-profile threats like terrorists, even as chronic blackouts and sputtering factories are themselves a deadweight on the economy that make it harder for the government to defuse popular unrest and radicalization. Other countries in the region, including Iraq, Yemen, and Egypt, have also grappled with the consequences of energy shortages that exacerbate pre-existing economic and social challenges. 52

53 Summary In order to establish and expand an Australian CTL industry as quickly as possible: 1. Pass through the fuel levy on retail sales until the capital cost of the plant is paid back. 2. Speed up environmental approvals. 3. Major project status for each plant. 4. Provide flexibility in fuel specifications for FT diesel. Australia needs to invest in excess of $110 billion building CTL plants. We have just spent $60 billion building three LNG plants at Gladstone. So we have the capacity to build what we need to back out oil imports. 53