Tuesday, February 17, 2015

Fooling peak oil one more time: can we find new sources of liquid hydrocarbons?



The world peak of conventional oil production took place in 2005-2006, but the supply of combustible liquids did not decline, mainly because of the contribution of the newly developed "shale oil" (or "tight" oil) fields. With the impending worldwide peak of "all liquids" it is likely that the industry will try a new, all out effort to squeeze out the last drops of liquid oil from whatever sources are available, no matter how dirty and expensive. It is not certain that the attempt will be successful, but it is likely that some new monstrosity will be created in Sauron's satanic mills. 



Peak oil is something referred to as a "theory," intended in a derogatory sense. But the concept is not just a theory; production peaks are historically observed facts, occurring not just for oil, but for any natural resource which is exploited beyond its capability to reform (e.g. for whale oil).

Not only peaks are a common phenomenon, but often they can also be predicted with good accuracy. That's the case for two of the major events of this kind; the peaking of oil in the US in 1970, and the worldwide peaking of "conventional" oil in 2005-2006. The first was foreseen by Marion King Hubbert in 1956, the second by Campbell and Laherrere in 1998.

Yet, despite the accuracy of these predictions, "peakers" are often taken by surprise when these peaks do not lead to a decline in the fuel supply. The US 1970 peak was offset by an increase of oil imports and by a major shift to coal for the production of electricity. The world peak of 2005-2006 was compensated by the increase in the production of non-conventional oil, in particular by "tight oil" (commonly referred to as "shale oil"). In the end, neither peak was the great turning point for humankind that some had foreseen.

Today, we are facing a new peak. The collapse of oil prices of late 2014 is an indication that the market cannot absorb the abundant - but expensive - unconventional oil that could be theoretically produced. The result is "peak liquids," arriving in a few years at most (according to Arthur Berman). But, just as it has happened in the past, the industry will not stand still. They will be actively seeking for new resources to keep production ongoing. Can peak oil be fooled once more, at least for some time?

As well known, predictions are difficult, especially when they are about the future. But it seems evident that, out there, something is stirring up and new "solutions" are being explored to counter the inpending decline of combustible liquids. The emphasis on nuclear energy in the latest IEA report is a sign of the times. But nuclear does not produce liquid fuels and the costs and the associated complications make it an unlikely savior of the world. The same can be said of biofuels: inefficient and land consuming; they have already reached their practical limits. Rather, the oil industry has always been good at squeezing out flammable liquids out of the dirtiest possible sources. Tar sands remain a potentially large resource, but their exploitation is hugely expensive. Perhaps more likely, the new "miracle" could be found in the "coal to liquids" process. 

Turning coal into liquids is an old idea and, in the 1940s, the Germans powered their whole war machine using synthetic fuels manufactured from coal. It was a tiny production compared to what we need today, but it shows that, in an emergency situation, coal can come to the rescue.

Making fuels from coal was contemplated during the first oil crisis of the 1970s, although it turned out that it was not needed. Then, in his 2005 report, Robert Hirsch suggested that peak oil could be staved off by a crash program involving - among other things - coal liquefaction. The technology is known, some plants are in operation right now; Wikipedia lists 6 plants in operation in the US and 6 more outside the US. Many more are planned. So, if a crash program on coal were to be started now, it could produce a major fraction of the US demand in 10 years, around 5 million barrels per day (image below, from Hirsch's report), an impact similar to that obtained from shale oil over a similar period of time.



Is it really possible? Will we see a rush to coal similar to the rush to shale that we have seen in the past decade or so? It can't be excluded. The world's coal reserves are - theoretically - very large, even though whether they are all extractable is another matter. Before that is ascertained, however, it is not unlikely that the financial system can be convinced to sink great amounts of money into the new, potentially very profitable, coal adventure.

The real problem is, of course, that trying to replace oil with coal would mean wrecking the earth's atmosphere and moving well over the "tipping point" of climate change. It would mean to forsake a whole planet in exchange for riding our SUVs for a few years more. Yet, the thirst for liquid fuels is so strong, and the denial of climate science so widespread and entrenched, that it is hard to think that the rush to coal could be stopped if - Heaven forbid - it were to turn out to be (or just perceived to be) economically profitable. So, before giving up with liquid fuels and admitting that the only way out is to go renewables, it is perfectly possible that some new monstrosity will be created in Sauron's satanic mills.

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Note added after publication. Some commenters have correctly raised the question of the net energy of Coal to Liquids. Is it positive? Is it larger than that of Tar sands or tight oil? But it is also a difficult question to answer. The LCA/EROEI analysis is a good tool, but affected by uncertainties, and technologies always change. The point is, I think, not so much what is the actual value of the net energy provided, but the perception of the financial market of whether some money can be made from coal to liquids.

I think we can compare with the housing bubble. What is the net energy of a house? Negative, surely. And yet, the financial system poured in huge amounts of money in something that was known not to have an intrinsic value. So, it is all a question of perception. And people misperceive things badly enough.....



25 comments:

  1. To replace a half of the current global liquids production with CTL plants we have to double the current global coal production. That is not impossible. But that is a huge task which would require trillions of longterm investments. For how long global coal reserves would allow to keep such a rate of extraction (like 15-20 bty) is also a big question.
    Anyway - yeah, they could try. Success is far from guarantied though (by success i mean here keeping liquids production on the comfortable level for the global economy for several decades more)

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    1. If they start, they won't do it to save the global economy; only for those areas which have coal; China, Russia, Australia, the US, and a few more.

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  2. I think where you wrote '5 million barrels per year' you actually meant 'per day'? That's what the graph says.

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  3. How do the economics of CTL compare with tight oil or tar sands? All three represent larger resources of $100+ oil but if the economy can't afford it?

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    1. It is a good question: is the net energy of Coal to Liquids larger than that of Tar sands or tight oil? But it is also a difficult question to answer. The EROEI analysis is a good tool, but affected by uncertainties, and technologies always change. The point is, I think, not so much what is the actual value of the net energy provided, but the perception of the financial market of whether some money can be made on coal to liquids.

      I think we can compare with the housing bubble. What is the net energy of a house? Negative, surely. And yet, the financial system poured in huge amounts of money in something that was known not to have an intrinsic value. So, it is all a question of perception. And people misperceive things badly enough.....

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    2. Nate Hagens has a good video lecture on this point.
      https://www.youtube.com/watch?v=U1_dsU1Dx0A
      It found it was not easy to get his point but his simplified yellow chart seems worth viewing 17 minutes into his long lecture. He illustrates what happens when an economy goes from spending 5% of GDP on obtaining and putting energy to work, to spending 10% of GDP on getting the same energy. Even if the total amount of energy obtained is the same, the said economy loses about half the original 'benefit' that was obtained from the original easier-to-get fuel input.

      I guess you are right when you say that the global industrial economy is not 'one thing' and that a different resource base in different countries makes a big difference, but Nate's general point nevertheless seems to hold. To build and maintain what it has become, industrial civilisation has needed the large ratio between the 'costs' of supplying the energy inputs and the various (and vast) ongoing outputs of goods and services. Half the ratio looks to make a dramatic difference: from 19:1 to 9:1 in Nate's illustration!

      best
      Phil

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    3. Sorry about the typo above; should have been - "I found it was not easy...”
      I would like to add that it was me struggling to get my head round the concept, not Nate's presentation.

      Perhaps the recent US shale-tight oil over 5Mbopd has arrived so far (apparently without much actual profit to the extraction industry) courtesy of a network of developments and continuing net global economic expansion that includes growth in China's manufacturing riding on the back of China's coal miners who probably have a purchasing power no greater than miners in our Durham coalfields up to 1950s whose output had fuelled the British Empire.

      Phil

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  4. Ugo,

    Patzek et al argued that coal to liquids on a large scale in the US would be impractical, both for for reasons of low energy efficiency, dramatic climate impact (2000% more CO2!!!) and the lack of available water, which is perhaps the key problem. It's a very, very water intensive process, which might make it hard if the US continues to experience more droughts. The paper is here: http://www.researchgate.net/publication/227303325_Potential_for_Coal-to-Liquids_Conversion_in_the_United_StatesFischerTropsch_Synthesis

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    1. Eh, well, Sam, if you can make good money with coal liquefaction and you are more than 60 years old, then you might reasonably think that when the impact of CO2 will arrive, you won't be around to suffer from it. And, anyway, what have those future generations done for us?

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  5. Isn't natural gas to liquid (diesel, mainly?) a cheaper process than coal to liquid? One would expect to see widespread use of that process before taking C-T-L.on a wide scale.

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    1. The process exists, surely. The difference with CTL is that it has never been tried on a large scale. I don't know if GTL is cheaper than CTL. Difficult to say, but gas is in itself a fuel that could be used to power vehicles (I used to have a methane powered car). So, it is cheaper to use gas directly in place of oil derived liquids, rather than going through the laborious process of turning it into liquids. Or so it seems to me.

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    2. About GTL there is the major "pearl" Shell project in Qatar :
      http://www.shell.com.qa/en/products-services/pearl.html

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  6. There's a lot of stranded NG in N. Dakota etc. Why isn't the USAF funding pilot plants up there to turn it into jet fuel? Main feedstock available as a negligible cost yet I regularly see breathless MSM articles on the Virgin Air mogul turning algae into kerosene, or the Navy turning seawater into gasoline. Huge hurdle regarding cost and availability of capital but point remains adoption of NG -T- Diesel for the military or other non cost sensitive players should happen before large scale adoption of C-T-L.

    I seem to recall that their was a boom in energy stock a decade or more ago. At that time Peabody Coal (stock ticker BTU) fancied itself a growth company (imagine that!) and floated plans to build utility scale coal fired generators near some of their mines. And BTU - if their legacy costs/heavy debt don't bankrupt them - presumably controls a large slug of some of the cheapest BTU's on the planet.

    Exxon could swallow Peabody with one month's operating profits. Since this hasn't happened, its likely that Exxon doesn't see C - T - L scaling to the level they require given all the problems that would accompany continuing business as usual via Coal to Liquid.

    A long winded way of saying, I guess, that even given the huge coal reserves its hard to see C-T- L becoming more than a large niche player and a sign of desparate circumstances.

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    1. Never underestimate the evil power of Sauron!

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    2. Ehr... I know that this is an irrelevant trivia in the context of the actual discussion, but, to be a little of a tongue-in-cheek "narrative-nazi" otaku/buff, in LOTR it was SARUMAN that (under the influence of the Palantir) corrupt himself, from his Istari "status", to a "dirty-technology mogul" ( http://en.wikipedia.org/wiki/Saruman: "Treebeard describes Saruman as having "a mind of metal and wheels". Evil in The Lord of the Rings tends to be associated with machinery, whereas good is usually associated with nature.").

      Sauron ( http://en.wikipedia.org/wiki/Sauron ) was "evil" "ab initio", as one of the "fallen Angels" followers of Morgoth ( http://en.wikipedia.org/wiki/Morgoth ), and, if we wish to extend the metaphor, maybe more incline to "biotechnology-like" perversions of the Eru-created "natural" world, as he... "crafted" the Orcs & Co. from the other races of Middle-Earth with, maybe, something more like a mystical-equivalent of a gene-engeneering process...

      All this to say that, maybe, instead of a Barad-dûr image, in the article incipit you should have used an Orthanc one ( http://qph.is.quoracdn.net/main-qimg-7fd6d20d4551cf6a483ac06f84cd8c4d?convert_to_webp=true )

      Ok, and now I will crwal again under my nerdy rock... ;-D

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    3. I didn't know all these details, but it is clear from the story and from the movies that, yes, it is Saruman who is industrially minded and evil. So, you are right, maybe it should have been something like "Saruman's satanic mills". But, somehow, "Sauron's satanic mills" sounded better. Anyway, thanks for the note!

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  7. Ugo - there are two super-massive hydrocarbon resources that may be applied to offset the depletion of conventional oil reserves, which have yet to get much evaluation across the web, so I'm hoping you might be persuaded to focus your expertise on them and provide a candid account of their potentials.

    The first is termed "Coal seam gasification" where coal is pyrolized in-situ by the addition of steam and a closely controlled oxygen supply in airflow, with output shafts bringing HT pyrolisation gasses to the surface that include CO, CH4, (raised) H2 and a hosts of other products. Stalin had a plant set up (in Kazahkstan?) that is still running with the gasses burnt for power production. The advantages over CTL are clear - no mining or transport of coal, and the heat energy may well provide advantages over normal GTL too. Alternatively a purification process could provide a simple vehicle gas which, as you say, is simpler than GTL.

    Given that there is no need of mining, the world's very large stocks of 'uneconomic' coal reserves could be utilized by this technique, and given that there is no mining, transport and combustion fly ash disposal costs some 'economic' coal reserves may be more profitably utilized by this means.

    The second is of course the methane hydrates that are ubiquitous across the world's continental shelves, that reportedly hold over a trillion tonnes of carbon in the form of methane ,with each molecule held in a lattice of frozen water molecules (as some readers might be unaware). They also occur in permafrost, for instance on the Tibetan Plateau where Chinese engineers have reportedly found stocks sufficient to supply China's gas needs for 80 yrs at present consumption, and extraction is getting under way. On the seabed stocks about 20 nations are investing in extraction RD&D, led by Japan, which of course has major motivations due to its lack of other fossil resources and its extant nuclear capacity being discredited for generations to come.

    Unlike the ASPO assumptions of insufficient global fossil stocks to make AGW dangerous, it seems to me that the fossil era is not going to end for want of fossils.

    I'd really like to know what you make of these two potentials.

    Regards,
    Lewis

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    1. Correct, Lewis, and let me add that there also exist "in situ" technologies to extract hydrocarbons out of deposits without the whole complex and expensive process of digging out the sand, transporting it to processing facility and all the rest. Together with in-situ coal gasification, these are feasible technologies, even though nobody can say how efficient they will turn out to be. Fortunately, extracting anything from hydrates may turn out to be impossible (perhaps.....)

      All these are technological wild cards whose future developments are impossible to predict. Supposing that someone wants to invest heavily on - say - in situ gasification of coal, no matter how efficient the process will turn out to be, then the financial speculation wheel will attract more capitals into it and then the sunk cost will push people to continue trying.

      And there might be a further lever toward this kind of things. If you read Hirsch's report you see that they are proposing a sort of militarization of the economy in which the government takes over and forces the production of synfuels from coal. Governments don't care whether a process is profitable or not and they might act in this direction with the best intentions, that is to avoid the total collapse of the economic system (and get some fuel for their nice toys, tanks, planes, drones, etc...)

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    2. "And there might be a further lever toward this kind of things. If you read Hirsch's report you see that they are proposing a sort of militarization of the economy in which the government takes over and forces the production of synfuels from coal."

      And, this, IMHO, is what will probably happens, at least in the USA (if the general system there doesen't implode before for other eco-socio-economical iusses), if/when the Midde East oil will become totally out of reach: the military-industrial complex will take-over/merge with the the big oil industry in a Leviathanic Juggernaut (so the "best" of both the hobbesian State and of the mythological inarrestable force of desctruction).

      How much of this energy will reach the "table" of the ordinary sheeple is, obviously, a very different matter... :-(

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  8. Not mentioned by Ugo, but CTL is an extremely polluting process, spewing out CO2 as well as sulphur dioxide. I lived a few hundred km from a CTL plant in South Africa, and many days we had such bad SO2 pollution that it was hard to breathe + headaches + sore throats. Hell on Earth.

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    1. Oh, yeah. Coal liquefaction is for real men. Not like those things.... those solar cells.... those are for sissies.

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  9. Dear Ugo,
    very nice article. Only one question. You state that the drop in oil price is mainly due to the fact that world economy cannot absorb huge demand at very high prices... don't you think that such a low price is also (maybe partially) due to geopolitical issues? we both are not economists so we know that free market mechanisms are a nice smoke curtain to hide political dynamics ;)

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    1. Certainly possible. In my opinion, unlikely - but that's just my opinion.

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  10. I don't think there is enough coal in the world for CTL. India has been planning CTL plants for what - 30 years? - and they still have not a single one up and running. CTL is expensive. There is not enough coal. Won't happen, except small-scale.

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)