A reasonable effort there kahuna1, however I think you failed to...

A reasonable effort there kahuna1, however I think you failed to deal with the some of the more important issues regarding the oil problem or ‘crisis’.

One of those issues (which you mention in passing) is the ‘price elasticity of demand’ for oil, gas and other fuels. This issue is right at the heart of the ‘crisis’ debate, and it is absolutely critical in any discussion as to how long hydrocarbons will last into the future; at least from the demand side perspective.

Also, you seem to be treating your figures regarding reserves estimates/ demand growth estimates, as gospel. I personally have seen a variety of different estimates that are significantly at odds with the numbers you posted. Sourcing you figures would be helpful and give more credibility to work. Nevertheless, thanks for generating the discussion.

To pick you up on a couple of points in your recent posts:

You stated that LNG has the same efficiency as other transport fuels. Rubbish!! Sorry to be so blunt. Frankly I am surprised you have not discovered this through your research - diesel has always been the most efficient hydrocarbon fuel for transportation purposes; it possesses a greater distance covered per unit of volume.

Diesel is marginally ahead of petrol in efficiency, and indeed it is a long way ahead of LPG and LNG (estimates these are around 20% less efficient)... Remembering though that LPG and LNG are not the same beast - LPG essentially comprised of the propane and butane derived from natural gas, whereas LNG is almost solely liquefied methane; methane being the main component of natural gas....

Ian Whitchurch is exactly right when he said there is a real shortage is in liquids. In the transportation sector, which makes up around 50% of oil consumption in most Western countries, diesel and petrol still exist as more efficient fuels, relative to gas. It is no surprise then to see these fuels still demanded in such massive quantities (and crude oil as a consequence).

And quite rightly so...leaving all the environmental concerns aside. After all, economic growth is driven by efficiency, and producers of goods and services cannot be blamed for demanding the transport fuel that maximises their returns. Being forced to switch all modes of transport to natural gas would retard economic growth significantly. There is of course the alternative side to this argument but for brevities sake I’ll leave it.

As far as the GTL (gas to liquids) technology goes, Ian Whitchurch is absolutely correct again. We are not talking about liquefaction of natural gas here (LNG). With GTL we are talking about using natural gas to make more complex heavier liquid hydrocarbons like synthetic diesel (which is cleaner), naphtha, as well as other substances like paraffin, using the Ficher – Tropsch technology that was developed in Germany in 1920’s.

The economic viability of GTL is highly sensitive to gas (feedstock) prices, and of course the prices of oil derivatives which generate the revenue. In this buoyant oil price environment GTL producers seem to be popping up everywhere, with Sasol, Conoco, Syntroleum (talking with Oil Search), Exxon, Rentch to name a few.

The figures I have show that with GTL it requires 450 terajoules of natural gas per day, to produce 45,000 barrels of oil equivalent per day. This equates to around 10,000 cubic feet of gas to produce one barrel of oil equivalent. When you consider that the capital costs of setting up a GTL plant are very large, and exceed LNG liquefaction plant set up costs by a long way, Ian’s figure of 30,000?? cf gas to produce one barrel of oil might be correct.

Your comment about the Sydney buses being run on LNG is interesting. The fact that these city buses have converted to LNG (as have many around the world) is not a function of LNG being more efficient than other fuels; rather one of government intervention in the free market to protect the environment.

Importantly, it is true that the only reason why LPG, LNG, pipeline natural gas, or CNG (compressed natural gas) have gained a foothold in Australia as transportation fuels is because of government assistance - through a favourable taxation/excise regime. The absence of any taxes upon LPG was the primary cause behind LPG gaining some market share here in Australia years ago in the first instance, otherwise the free market would have creamed it. Gas’s market share is still tenuous to say the least and would imo be smashed to pieces (metaphorically) if the government decided to treat these fuels in the same way it treats diesel and petrol.

Looking around the world at the moment, it is diesel that is gaining market share in transportation... Europe, in a big way, and also America – although not as fast as Europe - the Yanks still have some old myths running about the power and efficiency of diesel comapred to gasoline. Gas is gaining much less favour, and indeed this is not without massive government intervention.

Moreover, the demand for clean synthetic diesel is huge, and this is why these potential GTL processors around the world are so eager to get busy. GTL technology can provide the clean diesel that meets the emission standards that governments require.

Back to the oil crisis problem elasticity of demand, there is an abundance of material on the web in this area. I have seem people on Hot Copper assert that at US$70-$80 a barrel world oil demand would be crushed. I have a real belly laugh when I see that one. Wishful thinking from those that don't hold energy stocks..

Consensus out there seems to be that there will be substitution affects at around US$70,but personally I doubt they would be significant. Real question is at what price does the non-hydrocarbon (currently ultra costly) sources of energy become viable. Not many can agree on that one


Cheers