oil too expensive ucg cheaper alternative

There are two central imperatives for this change in US strategic policy. The first imperative is simply cost, since at this time synthetic crude oil based fuels cost around half of natural crude oil based fuels, per barrel. Given the enormous fuel burn of the US military machine, of which the US Air Force consumes the lion's share, there is a huge fiscal incentive to abandon legacy crude oil based products.

The second imperative is no less important. Its aim is to reduce dependency on foreign imports in a volatile global market. Many major crude oil producers, such as Iran and Venezuela, are intensely hostile to the US. Other producers will play political games to extract favours and concessions over access and pricing of crude oil.

There are a number of processes via which synthetic fuels can be produced from coal, oil shales or natural gas. Each has unique advantages and disadvantages.

The best known process is the classic Fischer-Tropsch or 'F-T' process using coal. In a conventional F-T plant, coal is heated via combustion and steam is injected to produce 'synthethis gas', a mixture of carbon monoxide and hydrogen. Synthesis gas is also known as 'coal gas' or 'town gas' and was for decades a mainstay of European industry, used no differently than methane based natural gas is used today.

The resulting synthetic crude oil is then refined no differently than natural crude, using conventional refinery stacks, to produce fuel blends, lubricants and chemical industry feedstocks.

It is worth observing that one unwanted byproduct of the progressive depletion of most currently producing oilfields, is that the density and impurity content of the natural crude increases as the oil is extracted from the geologically deeper strata. This is one of the factors, other than increasing global demand, which is contributing to increasing costs in natural crude based products.

A consequence is that the higher purity synthetic product is cleaner and less damaging to the environment, as well as being cheaper.

Any alternative to this method which is cheaper, and arguably environmentally better, is the technique of Underground Gas Conversion (UGC), pioneered by the Soviets in the 1950s, and since then widely used in Russia and other former Soviet republics. The UGC technique dispenses with the extraction of coal and use of reactor plant to generate synthesis gas. Instead, a coal formation located at a suitable depth has shafts drilled into it, using oilfield type techniques. The formation is then ignited underground, and air is pumped in to sustain the burn. Steam is then injected into the formation to produce synthethis gas underground, which is then extracted via other shafts. The synthesis gas is then distributed via a pipeline to user plant, be it for heating, industrial or other use. One such use is as feedstock to a F-T synthetic fuel plant.

Both the legacy and UGC methods or producing synthesis gas are mature and well established, and rely on access to coal of suitable composition.

The strategic issue of access to crude oil will in time become as important as the cost per barrel, as many major global crude reserves decline in output. A key consideration will be the global impact on demand of India and China, as these nations industrialise and drive up their per capita oil consumption. With both nations having billion plus population sizes, even a lower per capita energy consumption in both relative to the US and EU could still see global demand for fuels triple over the next two decades. If the demand per capita is comparable to developed nations, the result is a manifold increase in global annual consumption.

While there are yet to be discovered oil reserves, the reality is that most easily accessible reserves are in production, and many have crossed their respective peak production output points. It is an unfortunate accident of circumstance that a great many oil reserves lie in nations which are unstable, or marginal stability, or overtly hostile to the West.

Synthetic fuels thus offer an escape route from the converging pressures of growing global demand and declining output of easily accessed oil reserves.