coal to liquids technology in china ? , page-2

Hi Wingmann,

I am a big fan of the CTL story and its potential application to CTP. I have put something together, and feel free to comment with your thoughts. I have tried to summarise much of the IEA report pertaining to CTL and I have tried to show how it may apply in at least a basic principle to CTP


Coal to Liquids (CTL) & CTP: Something to consider

Coal-to-liquids according to the International Energy Agency

The 2010 IEA report suggests that CTL and oil shales are amongst the most expensive of the unconventional oil sources. The report also believes the CTL technology to be more likely to develop faster than oil shales, citing the maturity of the technology and the perceived lower risk and environmental impact: As plants will most likely be located near active coal mines, land usage will be more acceptable to local communities. The report also makes mention of coal-and-biomass-to-liquids (CBTL) with carbon capture and storage (CCS) as being highly attractive by virtue of its smaller carbon footprint.

The report projects an increasing popularity of this method between 2015 and 2035 whereby they cite this technology as being used almost universally across the globe. The IEA believe Australia will become a major player in this market along with China, South Africa, the United States and India. The "450 Scenario" is described as having a trajectory based on a slightly reduced oil demand (based on pursuits of non-fossil fuels) and a more obviously reduced coal demand - the differential between oil and coal prices expanding and therefore making CTL plants increasingly attractive. They make the assumption that CCS will become accepted in this time as common practise.

CTL Technology

This process of synthesising liquid hydrocarbons from coal is said to have been used during World War 2 by the Germans and then extensively by the South Africans since 1955 when Sasol launched its CTL plant. They are said to have produced more than 1.5 billion barrels of synthetic liquid fuel in the 55 years since the launch.

Three primary methods of CTL are described in the IEA report, providing a very interesting potential and opportunity for Central Petroleum.

Syngas to Diesel
The most popular is claimed to be the use of Syngas technology turning coal into liquid hydrocarbons which is in turn catalysed into high quality diesel using the Fischer-Tropsch technique (using an iron or cobalt catalyser). As mentioned, this is the technology used by Germany during the Second World War and is still used by Sasol in its 160 kb/d capacity plant.

Syngas to Methanol to Gasoline
The second methodology is described as being similar to the first method; however the Syngas is first converted into methanol, and subsequently into gasoline. ExxonMobil piloted this process in New Zealand for 10 years, however more recently this process has cropped up in China through the Shenhua coal company.

Direct Route
Here the coal is directly reacted with hydrogen, in the presence of suitable catalysers to produce liquid oil that can be used in a standard refinery to produce commercial hydrocarbons. Again Shenhua is the company cited as the primary model using this methodology - production currently at 24 kb/d.

The report mentions that the first two "indirect" models are the most popular as the technology is more mature as the key components of gasification and Fischer-Tropsch are used in other applications.

Interestingly, the IEA report claims that despite the gasification unit representing the largest capital investment in this process of procuring hydrocarbons from coal, it is able to diversify its own risk by its flexibility and ability to be used in power generation as chemical feedstock and to produce methane, in addition to being used as an input for the second stage of liquid hydrocarbon synthesis. This could tip the scales in a feasibility study.

Projects

- The Clinton project in Australia, with a capacity of 13 kb/d scheduled for 2015.

- The Felton/Ambre project in Australia, with a capacity of 18 kb/d, scheduled for 2014, based on the ExxonMobil methanol-to-gasoline process.

- The DKRW Medicine Bow project in the United States, with a capacity of 20 kb/d expected in 2015, also based on the Exxon-Mobil process.

- The Rentech Natchez project in the United States, with a capacity of 30 kb/d.

- Three 4-kb/d projects in China, in Lu'An and Yitai with the Fischer-Tropsch route and the ExxonMobil-Jincheng Anthracite Mining Co (JAMG) project using the methanol-to-gasoline route. These are all in the start-up phase

Based on the evidence of these projects (extracted from the IEA 2010 Report) we can surmise that any such endeavour would follow similar timeframes to: 4-5 years feasibility study and design, 5 years construction and start up. Any project commenced in 2011 would foreseeably come online in 2020.

Linc Energy - Chinchilla Project

Of the projects researched, the one that provided the most compelling read was Linc Energy's Chinchilla project in Australia. Their project combines Underground Coal Gasification (UCG) to produce the Syngas, with a Fischer-Tropsch plant to transform the Syngas into liquid hydrocarbon - aiming for 20 kb/d.

The report claims that the logic behind this combination has a fundamentally sound basis, citing the theoretically much lower capital costs of UCG in Syngas production, and more pertinently for Central Petroleum, allows for much deeper, un-mineable coal beds to be utilised and exploited. As UCG has been considered a favoured direction for Central Petroleum, there is an obvious synergy in juxtaposition of UCG and Fischer-Tropsch in CTL production with a Joint Venture Partner (in particular Chinese).

Based on Linc's project and others similar to this, the range of estimates for capital costs associated with CTL range from $80,000 to $120,000 per b/d of capacity. Syngas/FT plants offer significant economies of scale and are in this range more specifically for ranges upward of 50 kb/d and beyond.

Environmental Impact

Primarily, the most obvious disadvantage of CTL is CO2 emissions arising primarily from generating the hydrogen. With the indirect models described previously, the CO2 produced with the Syngas must be separated prior to the Fischer-Tropsch (or methanol) process. In this way, the bulk is captured anyway, hence why CCS is recommended as a relatively inexpensive addition with transportation and storage the only extra requirements, both much less expensive than capture. It is reported that CO2 purification to a CTL plant costs approximately $3-$6 per barrel of oil produced.

Another impact stated in this report is that of water usage. CTL plants currently average usage at 10 b/d of water per b/d of oil produced - quite substantial. This would become an issue where water is scarce and would affect a company in an unfavourable location. It is noted however, that water can be recycled so long as appropriate care is taken to ensure its quality. This would reduce the actual usage of water to 2 b/d, a figure much more manageable.


SWOT Analysis

Strengths

- Likely to develop faster than shale oil
- Less environmental impact than shales
- Ability to combine UCG and Fischer-Tropsch
o Diversification of risk through additional uses of UCG syngas
o UCG can take advantage of un-minable and deep coal
o CTP already identifies UCG in its future
- Higher profit margins, and larger scope for income due to less wastage of discovered resource

Weaknesses

- Costs - capital cost of UCG is rather high upfront
- Larger projects favoured for maximum scale economies (50 kb/d)
- CO2 emissions require CCS
- Need for high volumes of water

Opportunities

- Increasing price differential between coal and oil prices will create opportunities in CTL
- Popular amongst Chinese companies with 6 new projects announced
- Provides a way to harness deeper coals and utilise all levels
- Exxon Mobil, Shenhua and Linc Energy all pursuing this method - potential partnerships and joint ventures?
- Carbon Energy Australia's (CNX) CSIRO developed UCG technology local and more likely available - joint venture? Synergies?

Threats

- Government policy on CCS - if support turns negative
- Oil price shocks would affect profitability
- Water shortages in the NT


Let me reiterate that this is all extracted and interpreted from reading materials of the IEA and my own pre-existing knowledge of CTL. I am well aware that the models shown as examples are different in their own ways. The purpose of this is simply to highlight my belief that there could be a way to apply this model to CTP. We may have to make it fit again in our own unique way, but this could be the right direction? Some form of pre-feasibility study would be highly attractive to a joint venture partner as it demonstrates a readiness to grow and develop, and moreso an eagerness to get the job done in a highly professional manner. I don't see how it could hurt our chances of finding joint venture partners. If anything, it will makes us all the more attractive as we do everything we can in our limited capacity as a small junior in Central Australia.

Anyway, I have said enough, and as always you should all do your own research and realise that everything on this site is purely opinion. This is mine. Let me know what you think!

Experts... tear me to shreds! I am ready to learn more :)

Thanks for your time.

Good luck to holders in this any any other stock.

RB