Guest essay by David Archibald
During World War II, one Russian physicist realized that the United States was working on an atomic bomb when articles about high energy nuclear reactions disappeared from the physics journals he subscribed to. As an interested observer of coal-to-liquids (CTL) developments, I got the same feeling when reading the programme for the World CTL Conference 2013 held in Shanghai on 16th April. There was almost nothing about China’s CTL projects.
We all know that China has building coal-fired power stations at the rate of one a week. They are also building a number of CTL projects. News on these projects now seems to come largely from Western equipment suppliers. For example, the MAN Group of Germany announced the sale of compressors for the Shenhua Ningxia CTL project. The compressors will be used to make 40,000 tonnes per day of oxygen which equates to CTL production of 120,000 barrels per day.
Shenhua is China’s largest coal company. The Shenhua website doesn’t mention the Shenhua Ningxia CTL project which would have a capital cost of the order of $10 billion. In fact the company’s news section on its website hasn’t been updated for a year. It seems that news on CTL projects in China has gone dark.
Why would that be? Let’s go on to look at the state of fill of the Chinese strategic petroleum reserves as outlined in this document. China has accelerated the rate of build and fill of its strategic petroleum reserves in the last few years. It could reach its formal target of almost 700 million barrels, equivalent to the US strategic reserve, by 2015. This graph shows the comparative size of the US, Japanese and Chinese strategic petroleum reserves:
I believe that the reason China has gone dark on its CTL projects is because it considers that they give the country a competitive advantage. Shenhua has stated that its first CTL plant, a direct liquefaction facility in the Ordos Basin, has an all-in cost of $60 per barrel and that it is very profitable. Now any company, and any country, in the world that has coal deposits could copy Shenhua’s successful example and start making money from their own CTL projects. That isn’t happening. Why might that be?
A big clue is in the quote following from an interview with an International Energy Agency analyst. The role of the International Energy Agency, based in Paris and largely funded by the United States, is to talk down the oil price as a counterpoint to OPEC. It is not to be confused with the Energy Information Administration, part of the US Government.
“During a recent briefing in Washington, D.C., IEA analyst Laszlo Varro was pessimistic about CTL. “Essentially, energy policy needs to replicate a war blockade,” he said. “The only country that has meaningful investments in coal to liquids is China.”
Varro added, “It’s a big carbon dioxide factory.”
With the EPA in the United States hell bent on closing down existing coal-fired power stations using carbon dioxide emissions as the excuse, getting funding for a new coal-burning facility of any sort is going to be a difficult sell. The consequence of that is that the United States is denying itself its largest potential source of liquid transport fuels commercially viable with current oil prices and technology (that definition allows me to avoid mentioning the Green River Shale).
Let’s put the potential for liquid fuels from coal in the United States into perspective. In the four weeks up to 17th May, the Unites States produced an average of 7.315 million barrels per day which is an annual rate of 2.670 billion barrels. In those same four weeks, the United States had net petroleum imports that were slightly higher at 7.324 million barrels per day which is an annual rate of 2.673 million barrels. All up that is an annual consumption rate of 5.343 billion barrels. For those who still think that the Bakken Formation in North Dakota has untold wealth and should be factored in, the United States Geological Survey recently released an assessment of that formation’s potential of 7.4 billion barrels of undiscovered, potentially recoverable oil. So the potential of the Bakken accounts for about one and a half years of the current consumption rate.
The United States currently burns about one billion tonnes of coal per annum in power stations. Put through CTL plants, that one billion tonnes could make 2.2 billion barrels of liquid transport fuels, largely replacing the imported component of oil demand and making the country energy independent. It is not the price of oil that is stopping that from happening. It is the witchcraft and voodoo of official climate science. Of course the electric power coming from coal would have to come from another source, but that is doable too.
Now let’s go back to that quote from the International Energy Agency analyst: ”energy policy needs to replicate a war blockade.” and “the only country that has meaningful investments in coal to liquids is China.” It seems that one of the reasons that China is investing in coal-to-liquids is that it expects to be subject to a war blockade in a war that it will start itself. On the other side of the Pacific, the United States, which will do the heavy lifting in any such war started by China, is handicapped by denying itself a potential supply of liquid transport fuels and the optimum allocation of its resource endowment. That, dear readers, is the worst consequence of the witchcraft and voodoo that is the current state of official climate science.
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The hilarious part is that an aggressive fracking campaign will do more to lower carbon output than all the wind turbines and solar cells that have been built so far. Lower gas prices and stable EU gas production will save money too! The reason that Denmark has such high emissions is that it, like other EU countries does not want to rely on a Russian billionaire for winter heat & power.
To .
wws says:
May 23, 2013 at 9:45 am. You were right on the money about Ford here in Australia. They have just announced that they are packing up and leaving in 2016. Reason they gave was our costs here are double Europe and four times Asia (Read ”Carbon Tax” for costs here in Australia).
In reply to: “Louise says: May 23, 2013 at 11:55 am
“In a report on the Electricity Market Reform published today, the Committee on Climate Change presents new analysis showing that there are significant economic benefits from investing in a portfolio of low-carbon technologies through the 2020s rather than investing in gas-fired generation.”
William: Hi Louise,
The devil is in the details. There appears to be no way to simplify this any further.
The cost to Western countries to reduce carbon emissions worldwide (not locally) by 80% has been underestimated by a factor of five to ten, all costs in (see below for details). The Western tax payers will not accept war time like sacrifices which would be required to support a carbon limiting world deal. There is only so much GDP for taxation. There needs to be tax dollars for education, health care, roads, bridges, police forces, to run governments, and so on. Tax payers hope to retire by 65 and need to have some surplus funds to save for retirement.
The Committee on Climate Change assumes a world tax on carbon and carbon calculations for all goods manufactured. i.e. The cost of pants manufactured in China would include a tax on the carbon to manufacture the pants and to transport the pants to Britain. The carbon goods tax is assumed to keep a level playing field and move manufacturing back to Western countries and/or avoid more job loss to low cost energy/labour countries.
The Committee on Climate Change do not include in their economic calculations the cost to the Western tax payers to get agreement from the developing countries.
India and China have stated that they will not sign on to a binding world carbon capping agreement until they reach the same economic prosperity as the Western countries and in addition they have requested that Western countries reduce their carbon emissions by 80% before the developing countries need to act.
And in addition they are asking that the Western countries transfer a percentage of Western GDP every year to assist the developing countries in the transition to a super low carbon economy.
And in addition some of the developing countries would like compensation for historical past CO2 emissions from the Western countries. This would in particular disadvantage Britain.
There is zero chance of a reaching a world agreement on CO2 emissions. Western voters would not support it. Developing countries will not stop their development to protect against a non-existing problem (The science does not support boiling oceans or even slightly high warming.) unless the Western countries are willing to bankroll the madness.
http://www.theccc.org.uk/wp-content/uploads/2013/04/CF-C-Summary-Rep-web1.pdf
Reducing the UK’s carbon footprint and managing competitiveness risks Committee on Climate Change, April 2013: Competitiveness
In theory, UK climate policies could cause the production of goods and services to shift overseas and they would be imported instead. This would reduce emissions as measured on a production basis, but not on a consumption basis
Trends in the UK’s carbon footprint
The UK’s carbon footprint has increased over the past two decades, as growth in imported emissions has more than offset reductions in production emissions. However, our analysis shows that offshoring of industry in response to low-carbon policies has had at most a minor impact in reducing production emissions, and the carbon footprint would have increased more had production emissions not been reduced.
The UK’s future carbon footprint
To achieve the climate objective 2, there is a need for a global deal to substantially cut global emissions over the next decades. A consequence of this would be that the UK’s carbon footprint would fall.
Competitiveness risks of carbon budgets
. These risks exist for energy-intensive industries where low-carbon policies could have a disproportionate effect on costs, impacting on profits, location and investment decisions. However, our analysis suggests that policies already announced by the Government should be sufficient to address competitiveness risks for energy-intensive industries to 2020. These would continue to be manageable beyond 2020 in a carbon-constrained world where other countries commit to and deliver the emissions cuts required to achieve the climate objective. If other countries were to depart significantly from this course, an assessment of global ambition and therefore ambition in UK carbon budgets would be required, rather than of competitiveness risks per se.
What we have witnessed in the past is control, control, by the bureaucrats. Shades of Orwell’s, 1984 (actually too close for comfort). But they are learning ever, so slowly, that no one can control the climate. Switch on, switch off.
Welcome to a truly green Europe.
What is rarely noted is that often such policies are “brown” not “green”. In order to substitute something for “carbon”, other things need to be done. How “green” was the 3 gorges dam in China? Would you dam all the major rivers for Hydro in Europe? Nuclear is or can be green (LFTR especially), but they don’t want to do that either. The windmills aren’t merely quixotic, they kill birds and change weather more than anything a few ppm of CO2 could do. Nor do they want them where the wind is (nor tidal power where tides are, etc.).
Over the last 8 years, the price for energy paid by the average UK household has risen from about £600 to about £1470 per year, It has more than doubled in the past 8 years.
The UK government keeps on telling UK citizens that its green energy policy is only adding about £70 to the bill. The government suggest that it will only add a further £70 or so over the next few years but the consumer will be paying less for energy due to energy savings, more efficient electricial equipment, more efficient central heating boilers, better insulation, smart meters which will cut electricity usage.
The UK government is being very misleading. Already the average bill includes about £700 (not £70) to cover green energy costs and policy. Presently, the UK media has not explained this to the public and the bills issued by energy companies are not transparent.
About a month ago, the head (may be he was the financiakl directo) of Scotish & Southern Energy, which is one of about 5 large energy producers in the UK, was interviewed by the BBC. In this interview he said that the cost of supply (ie., the costs of producing and supply electricity to the consumer) represented about 50% of the bill total. He was rather vague as to how the other 50% of the bill was made up, and since the BBC do not like going off message, he was not really pressed on this. However, the picture he painted in broad terms was that that 50% was made up of two components. Half was made up by direct costs associated with green renewable energy. The other half was made up of costs forced on the industry by UK government policy. With regard to the latter he mentioned, costs with the energy company has to bear in providing subsidiseed home insulation for households that qualify for cheap insulation, and costs relating to subsidies which the energy company has to bear with reagrd to fuel poverty.
As noted the BBC interviewer did not remark on this extraordinary comment highlighting that only half of the bill relates to the cost of supply and that half of the bill relates to matters other than production and supply costs of energy. The BBC did not ask the director to elaborate on the the other 50% of the bill total.
So there you have it. Of the average £1470 bill, only 50% represents the costs of energy production and supply. About £730 covers costs associated directly or indirectly with UK green energy policy. About £370 is paid to cover the extra costs of green energy (presumably the costs associated with the minimum tarrif paid to windfarms with represpect to energy supplied by them to the grid and the feed in tarriffs paid to consumers who supply ‘excess’ energy to the grid). about £370 covers the costs of subsidising house insulation (there are loft insultaion, cavity wall insulation, subsidised central heating boiler changes, fuel pumps, and even double glazing schemes whereby energy companies subsidise the installation of these to customers who qualify for the subsidy) and about £370 goves to cover the company for schemes designed to help those in fuel poverty. The latter is particularly ironic. Government policy raises energy costs so high that many are forced into fuel poverty, with the result that the average cionsumer has to pay even higher prices to help those forced into fuel poverty. If UK policy had not been to hike the average energy bill so much there would be far fewer in fuel poverty and hence this part of the bill (which is about a quarter of the bill) would be lower.
People fail to understand that companies never pay any expense (the same is so with company tax which is much in the news because of so called company tax evasion). Every expense of a company is paid for by the consumer (those who buy its products or pay for its services). So any expense that a company has to pay is passed onto consumers, or more accurately consumers who can afford to pay. Those on welfar benefits or very low paid often recieve handouts (sometimes routed via the company by way of discounts, lower tarriffs, or by way government handouts such as tax credits or welfare payments).
So it is the consumer who has to pay the costs associated with providing cheap insulation or double glazing to the less well off, or who has to cover the bad debts pertaing to those who cannot pay their bills and defaults. It is the consumer who pays the generous feed in tarriff paid to the few wealthy people who can afford to spend £25,000 to £30,000 fitting solar arrays on their large houses, or the wealthy land owner who can instal some wind turbines on their large estate and get paid generous feed in tarriffs, and even paid when their turbine does not produce energy.
If only their was political will the cost of energy in the UK could be halved overnight by abollishing all the incidental green energy elements associated with the bill. Indeed, if the UK was to concentrate on energy production from coal with no CCS (the UK has enough coal for 1000 years or more) then the costs of supply could also be reduced.so that there could be even greater savings.
Those in the UK will have to wait for the MSM to highlight the true costs behind the fiasco of the UK green energy policy.
tz2026 says:
May 23, 2013 at 5:47 pm
“Welcome to a truly green Europe.
What is rarely noted is that often such policies are “brown” not “green”….”
////////////////////////////////////
This is true.
In the UK ,we are closing down coal fired generators and converting them to burning biomass. Biomass is not green. It has a significantly lower calorific value than coal and wnet burn it produces more CO2 per Kwh than does coal. That is not green.
Drax is a coal fired generator build on a coal pit. Not much energy (and hence CO2) is required to get fuel to the power plant. Now that it is being converted to biomass, it requires wodd 9wood chippings) sourced from forests in America to be shipped all the way from america to the UK. That too is not very green. If people want to be green, they should simply leave the forest in place in america and not destroy an old and natural forest.
Wind turbines are not green. A lot of CO2 is produced in their manufature, transportation to site, erection (including the requirement for substantial quantities of concrete) and connection to the grid, not to mention the precious metals involved and pollution in China. Once erected, they do not save CO2 emissions since they require almost 100% back up by conventionally fuelled generators which power generators are not working at optimum efficiency and produce more CO2 than they would do if sun at peak efficiency mode. Not a single conventional power station has been closed any where in the world as a result of being made redundant by windfarms.
That says it all. The flagship policy does not result in the reduction of CO2 emissions so what is the point of them. It certainly is not that they produce energy cheaply. Nor is it that they produce energy reliably and dependably. Their is no economic case, no security case, nor green environmental case for windfarms. That is the mad world of EU politics led by green zealots and pressure groups.
This posting seems to have inherited all the comments from the previous posting on the relative energy costs of EU, USA and Japan, and that post seems to have been disappeared.
Is something broke?
re steveta_uk
Yes, same for me.
Hang on, all the comments above relate to a 23 May article. Not the current one.
Here is a consequence of the global warming scare.
WWS’ comment about the boom in Texas is yet more confirmation that Europe is in deep trouble.
In my view the US is only at the very start of a recovery/expansion similar to that after WWII. At the moment we are seeing the “first wave” with investment going into production of the resources and first-level processing. As well as providing cheap utilities, that will reduce the cost of commodities like basic chemicals, plastics, fertilisers, etc.. In turn that will encourage the onshoring of manufacturing as the cheap utilities and commodities, with the saving in shipping, will negate the cost advantages of China et al. Each of these phases will bring with them the further expansion of support industries, services, suppliers, etc..
Sadly I fear that Europe is going to be hammered between the resurgent US and the ever-growing China and India. That may well end up in massive protectionism which leads down a very dark road.
Returning to the theme of CTL; it may be booming in China but it is also healthy in S. Africa. They set up a major industry to provide fuel during the years of the apartheid embargoes. It is still running: 50% of jet fuel is CTL- sourced, for example. There is also the potential for underground gasification which avoids sending people underground and/or ripping up the countryside. I believe there is a pioneer project in southern Australia where UGCG will be used to provide feedstock for fuel synthesis and to generate power.
More significantly…why only focus on CTL? Surely Gas-to-Liquids is at least as viable? Shell’s huge Qatar project is booming. While present gas supplies may not match coal, would anyone bet against us mastering gas extraction from methane hydrates?
Heh, I was wondering why Archibald was ignored. That’s unusual. But ignoring China is ignorant, and usual.
==============
When blogging about the Shenhua Ningxia CTL project last month, I concluded:-
That is, my political conclusion is China is putting the prosperity of 20% of the world’s population before pseudo-science. Keeping quiet is Chinese PR. Aside from oil coming from politically unstable areas, Chinese demand is rising faster than global output. An oil blockade like in 1973 would stop Chinese growth in its tracks, causing political unrest. China starting a war would be even worse, causing the economy to contract.
“wws says:
May 23, 2013 at 9:45 am”
Yes, Ford made the announcement yesterday. 1200 shopfloor jobs to go in 2016, ok so they have a few years. This will have a downstream and detrimental effect on suppliers too, with estimates of 10,000 indirect jobs lost. Ford plans to keep design and development teams however. Costs were cited as the main reason, wages here are higher than in the US. Making cars here costs twice as much as in the EU zone and four times as much as Asia. The CEO also stated energy costs, which in Victoria where Ford is based, are rising steeply. Of course energy intensive industries like car makers are being stung for AU$23 tonne of CO2. And yet, we have people in Aus who strongly believe the “proice ohn cahbon” has no impact on the inputs to production.
“TomB says:
May 23, 2013 at 9:47 am”
Ford has made operating losses of AU$600mil over the last 4 years even after receiving AU$2bil over the last 10 years from federal and state Govn’ts. The Australian Govn’t keep stating they are focusing on jobs and growth in the manufacturing base however, they have deliberately made energy intensive industries less competitive simply by introducing a tax on energy, the so called price on carbon. I have yet to see a wind or solar powered Bessemer Converter. With all the other taxes companies have to pay (Such as the payroll tax: A tax for each employee) its no wonder they are pulling out.
Rumour is there is a large direct coal to liquids plant on the go in the NW of China. It is not a Sasol plant which is the indirect process (Fischer-Tropsch). If it is sorted out well, it will be much cheaper than oil.
Hey you Boks, what is the break-even cost for Sasol? It used to be $29/bbl, not so? Even if it is $60, what’s the (economic) point of drilling?
Jimbo says:
May 24, 2013 at 3:45 am
“Here is a consequence of the global warming scare.”
That is truly sad, Jimbo. But I am reasonably certain that Gore, Hansen, Trenberth, Mann et al. don’t give a $#!+ about who they scare with their disinformation as long as they get their share of the Climate Ca$h (along with the rock-star fame they seek).
OK, shut down every one of the million odd wells in the US,stop all imports, and use nothing but Bakken oil ( just one layer of the Bakken three forks complex) and you will use it up quickly. Big deal. Can you spout any other meaningless statistics?
Do you have any idea how many prospective shales are in the US? The world? Coal liquifaction will be running against a strong current, a gusher actually.
observa says:
May 23, 2013 at 7:42 am
It’s the same in Australia with the millions squandered on solar and wind ‘reshiftable’ power bills and now listen to the gall of the leader of the Greens who along with Labor in coalition have implemented a carbon tax to deliberately raise the price of energy-
http://www.adelaidenow.com.au/federal-election/greens-promise-electricity-prices-to-drop-under-proposed-review/story-fnho52jl-1226649500714
Their answer to the train wreck is to set up another Gummint agency to monitor rising power prices. Unfreakingbelievable!
=====
No its about their usual cr*p standard idea..
cos the Jobs??? the Liar reckons Labor created were ALL greenbums on seats..and they want more so people who ARE the bums on govvy seats and rellies etc will vote for em to keep their paypackets.
while the rest of aus starves n shivers.
Election cant come soon enough!
Louise above may well be right–not because market forces drive energy production and market forces do not like “green” power, but because the financial class will make money and lots of it by investing in the government’s favored technologies, with ample government funding. Good for them, and bad for the rest of us who have to live on the funding we earn, and pay the unnecessarily inflated prices for the government’s favored technologies if we want heat in our homes.
Side note–here in the midwest, a very nearly coldest-on-record spring is ending. It’s been cold and wet, and farmers can hardly get the corn in the ground.
[snip – over the top -mod]
Rocky Road,
You mta want to read this.
http://www.nbcnews.com/id/46342612/ns/technology_and_science-science/t/fraud-claims-over-e-cat-cold-fusion-machine-heating/#.UZ9rs0o0-Sp
Nice article, David.
China is completely focused on economic growth, which means they focus on plentiful, cheap energy.