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.
kim says:
May 24, 2013 at 4:07 am
Heh, I was wondering why Archibald was ignored. That’s unusual. But ignoring China is ignorant, and usual.
**MODS – there is something funny about this thread. All the first responses, e.g. Bob Tisdale: “Congrats to Europe. Welcome back.” – I’ve seen these before, they are responses to a different thread on Europe back-tracking on energy policy – a thread which seems to have disappeared. Have two threads somehow blobbed into one? The responses specifically to David Archibald’s article only come later in the thread.
@ur momisugly Jakehig, 3:56 am
Conforming to the Orwell adage…”Ignorance is Bliss”….is the near total general population information on Gas-To-Liquid. This process, patented in 2006 by a TAMU professor has proven highly successful and scalable to even the smallest, low production stripper wells. Converting Natural Gas into very clean burning, pure gasoline at way below market rates. Combining G-T-L and C-T-L would be a reasonable policy…but not the current federal directive.
Meet the “New Chu….same as the Old Chu” ! ! !
The Senate gave unanimous, 97-0 approval to MIT professor Ernest Moniz as Secretary of Energy this week. He has stated that “debate on global warming is not even an option”. Yesterday the Poser-in-Chief teleprompter message was….”that the internet was the new terrorism”. Expect unicorns and rainbows to be the only allowable WUWT “debate” topics in the future.
<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.
Maybe China plans to grab the Senkaku islands? I hope they dont do it this week or next, I’m in Japan.
The entertaining part is that China imports American coal. Probably not physically the same coal as what they use in the CTL process, but resources are fungible. CTL increases demand for coal. The US serves that demand for a raw resource.
Separately, we participate in the oil market. We don’t participate in converting the low value resource into the high value resource.
Effectively, our CO2 policy is turning us into a mining colony for China where we provide the raw materials and we buy the refined good. We just don’t participate in the profitable conversion process.
richard verney says:
May 23, 2013 at 10:38 pm
“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…………………….”
People get the government they deserve. We, in the US, have Obama, you in the UK have whatever. Never would have thought this before, but I might be willing to trade with you…..soon.
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.
=======
Those that forget the lessons of history are doomed to repeat them. The Japanese attack on Pearl followed the US embargo of Japanese oil exports during the 1930’s. The Chinese likely suspect the same tactics may at some point be used on them.
I think these are the wrong blogs for this.
“vboring says:
May 24, 2013 at 6:52 am”
As well as Aussie coal and LNG sold to them at silly low prices! Seriously, AU$4 per tonne LNG!
“phlogiston says:
May 24, 2013 at 6:50 am”
Eyes on Aus. Buying land and resources at “alarming” rates, but not for our “leaders” apparently.
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?
I spent a year, a couple of years ago installing equipment for Shenhua near their CTL facility. When I asked one of their top officials about the plant, he indicated it was strictly a pilot project and they were lucky to produce any where near $40/bbl. I think that was their break even goal. The impression he gave me (for what it’s worth) is that they had a long way to go.
The leftists have always “known” fossil fuels are killing the planet. The only proof they ever needed was their own beliefs and feelings. Facts have no place in this debate for them.
So peak oil can be pushed back somewhat?
DA and others, a little fact checking. The cheapest CTL is an ExxonMobol process, not FT (SASOL). The reason no plants have been built is the cost is at least $120/bbl according to the most recent EM public estimates. Some might be post peak oil, since the IMF estimates oil will be around $200/bbl by 2020 due to peaking production. Raises separate issues about peak coal production, specifically in the US, for which I recommend Rutledges presentation available on his website at CalTech.
As for tight oil (fracked source rock) the TRR for the US has just been optimistically reestimated at about 27Bbbl. This must be viewed with some skepticism, since 15Bbbl is the Monterey shale which is very different than the others (portions not yet in the oil window, folded, faulted). And North America has over half of the worlds tight oil resource in place. So that does not spell much relief either.
Chinas command economy might allow uneconomic CTL for strategic reasons. The US won’t. Europe and Australia are learning how foolish costly green energy can be when the rest of the world won’t play.
That said, my books have argued for a wiser transportation fuels policy to avoid the disruptions that otherwise are inevitably coming within a decade, although Willis Eschenbach strongly disagrees (but, unusual for him) without much fact checking.
A seven-month-old baby girl survived three days alone with a bullet in her chest beside the bodies of her parents and toddler brother.
Argentines Francisco Lotero, 56, and Miriam Coletti, 23, shot their children before killing themselves after making an apparent suicide pact over fears about global warming.
Their son Francisco, two, died instantly after being hit in the back.
http://www.dailymail.co.uk/news/article-1254619/Baby-girl-survives-shot-chest-parents-global-warming-suicide-pact.html#ixzz2UDNlnzhC
The above is from a comment on Steve Goddard’s blog. When death occurs because of the fright people like Hansen have put in folks heads that is the worst consequence. Killing your own kids over fear of global warming. God help us all.
David,
The real, important implication of your article seems lost or too much on the majority of commenters here, that China is gearing itself up for an oil blockade because it intends or expects to get into a serious military confrontation with the United States. Of course what you are suggesting is that they are expecting a blockade, not necessarily a war, but it was such a resource restriction that sent Japan on its final course against the US and Britain, and a resource and economic restriction that sent Germany onto the path of WWII. So the distinction might be a fine one.
China is spending all the money it formerly received from the rest of the world, buying, exploiting and receiving the benefit of resources around the world. All these resources are eminently seizable by the host countries, a quality not lost on either China or the hosts. I have felt that China’s view is that the American currency they use to buy into the Canadian oilsands, for example, is pure paper, a meaningless and valueless item except for what it can get into China right now. Remove an iron ore deposit in Africa and bring it home? That is good. If the mine itself gets confiscated later, doesn’t matter: the money was just paper sitting in vaults somewhere – as China did not move it into the public sphere as a capitalist government would have.
The problem with a global conflict with China is that China has always, and I mean for thousands of years, been full up of the problem of maintaining control of its own, large population. The heroic attempts to unify its culture, right down to having the same time zone!, reflect the recognized problem of disparate perceptions of needs, desires and loyalties. Had China the same outlook of a Western culture, it would have been creatinng an empire long ago. Even Viet Nam and Cambodia weren’t overrrun, which in a German-Austria way, would have been easy. Same with North Korea.
So if we grant that China has not the desire, from a pragmatic point, for traditional empire development, but still has the human desire to control (and benefit from) more tomorrow than today, would it not make more sense that China is seeking to fix its economic top-dog position?
Energy costs are the underlying basis for all civilization. Our imaginations of the world as seen in the ’60s were rooted in cheap energy. Nuclear power was going to be so cheap as to not require metering, just a hookup and fee. Not quite, but with “free” power, you can fabricate almost anything, run anything. We’d all still drive Detroit iron with 455 hp engines if they were cheap to own and operate.
What I see with what you write is that China is pursuing a course of energy self-sufficiency at a long-term, low and stable energy cost. The rest of the world, focused on quarterly returns now more than ever, hopes to get through through smarts, agilility and a profound naivivite about luck and technology (the largest being that high tech makes expensive things cheap, as if my life today costs less than yesterday, which is why I work less than yesterday, right?). The future of Western civilization is one of higher and higher energy costs due to depletion of easy oil, gas and coal, the failure of nuclear fission to solve problems of deterioration and waste disposal, the failure of nuclear fusion period, and an eco-green focus on very expensive green energy AND a cost-based reduction in fossil fuels.
If China, which has a huge brown coal inventroy, low perm and gassy (which is why so many explosions and deaths occur in China every year, outside of poor safety practices) though they are compared to American and Canadian coal, and can invent high quality CTL processes which it prevents from exporting (as America did with computer technology), it can maintain a manufacturing base even as its lifestyle costs increase. Western countries will continue to export jobs to China if on a consumer level the costs are lower. It would take a trade war driven by import duties, to stop that, the result of which would be more a misery for the West than China as energy, not labour, would be the stumbling block.
Chinese focus on cheap energy will offset its rising labour costs. In the West, rising energy costs can only be nullified by reducing labour costs if the West is to stay competitive. But lower wages mean less consumption. As Chinese living standards – admittedly lower than those of the West – rise, under an energy cost scenario, Western living standards will have to drop.
Government-led CTL in China shows that China is pragmatic, while America and the West is ideological. China is creating a future it can depend on, while America is depending on a future it hopes to create. For those of us whose invest, it is like pitting companies that make toothpaste and toilet paper against any of the wonders of the last hightech bubble: all toothpaste investors are still here, but there are very few (though rich) bubble buyers.
Doug Proctor
Costa Rica is hardly even a punctuation mark in the Chinese essay, but does offer an insight. President Laura Chinchilla hopes her Asian guest will agree to further investments, on his visit next month. We need a dependable highway for Recope [State ‘refining’ monopoly – which currently only distributes imported fuels: its out-of-service refinery will re-start after an 80% Chinese-financed retrofit] to portion out combustibles.
Tico soccer fans will celebrate China’s construction of its National Stadium gift – ~USD$90 million – as they drive Chinese vehicles, powered by Chinese-refined fuel, over a Chinese-built highway, if Madame President seals the deal. Can anyone say, “force projection?” Decades of industrialized-West donations guaranteed a quiet neighborhood for the crucial Panama Canal. Debased US dollars now contribute to this secure Pacific-Atlantic trade route.
Who doesn’t benefit?
JT,
Costa Rica is a GOOD example, actually: it demonstrates a principle that we in the West don’t follow – all profit, no matter how small, is Good.
We must recall that even Germany did not intend to physically occupy Russia after it won the war. Germany intended to demilitarize Russia, create a consumer of German goods and receive “tribute”, mostly as resources. When you consider that China has not bothered to take Taiwan, even in the very beginning, you see that physical occupation in mature cultures is recognized as not always desireable, let alone do-able.
An economically dependent nation is useful – outside of the Roman, British or American model, wherein the dependent nation is disrespected and abused. Canada is in such a relationship with the United States, a benign relationship that lacks a certain amount of respect but is certainly not abusive. If China can cultivate relationships such as the US-Canadian one, they will be able to rise to the top of the pile without fear of rebellion or other trouble. It is questionable whether they can do this, but is true that they have a lot of experience with strategies and tactics of various kinds. And, as I described earlier, they are pragmatic.
Pragmatism is what the world needs. Not expediency, but pragmatism: what really works in the long-term at the least cost and greatest benefit, while not fertiilizing the seeds of its own destruction. If creating a one-world culture really isn’t workable – which history says it isn’t – then you have to find some way to live well with the variety. America tries to impose a Western way of life whereever it goes, and this strategy fails repeatedly – because it goes against cultural natures. If China can work the work so that we look to it WITHOUT RESENTMENT for our material welll-being, then we will support them with admiration rather than envy or jealousy.
But this post is about cheap energy being developed in China. Coal, CTL. Scrubbers will eliminate the air pollution (other than CO2 release) for them as it did for the West in the 70s. Electricity at stable, low price. What a good idea that the market doesn’t seem to value, for the same reason, I suspect, that Detroit continued to put out large cars when Japan outsold them with the small: of a capital efficiency basis, it is “better” to spend $1 and rake in $2 this year, than spend $5 and rake in $7.50 this year, even though at the end of the year you’ll have 50% more money in your pocket with the second scenario than with the first. We in the West see perception as more important than practice, as any eco-green who opposes the XL pipeline will acknowledge (a “line in the sand”, not a point of global significance).
Perhaps the Chinese face is the true face of the Jetsons: with enough cheap power, even a car can be made to fly.
Back during the ’70s Arab Oil Embargo, VW did a paper study on turning their coal in Germany into methanol for motor fuel using nuclear process heat. Made Gallon Of Gasoline Equivalent fuel at something like 70 ¢ or so (with 1/2 $ as a possible target). Yes, 50 to 70 ¢ / gallon gasoline equivalent.
At the same time, Mobil Oil invented a process using a zeolite catalyst to turn methane into gasoline and built a plant in New Zealand. The same approach can be used with the coal / methanol process to make the end product actual gasoline.
Nothing prevents turning gasoline and coal into methanol, ethanol, butanol (drop in replacement for gasoline in existing cars, though smell isn’t pleasant) or even plain old gasoline.
My best guess of “present dollars” is that it would run about $2.80 to $3.xx / GGE or actual gallons (US) of gasoline; but I’ve not done the inflation calculation (again…) in a couple of years. It’s always been very close to the present price of gasoline (usually a bit below, right now, about $1 / gallon below in California…)
China is just aware of this, and doing something about it. (We are aware of it and being stupid).
Oh, and worth noting is that Friends Of Obama make money on the deal. Warren Buffett bought Burlington Northern rail road a few years back for Birkshire Hathaway. ( I hold BRKA stock, FYI, so I benefit too, in a small way). He had sold the stake in China Petroleum company(s?) and moved into the largest shipper of coal from mine to port to China… So it’s important to make sure that coal doesn’t stay in the USA and get used in the USA… Need to sell it to China and ship it out so “friends of the administration” can make money on their investments…
Were I in charge, I’d have a high temperature Molten Salt Reactor built next to a coal mine and putting finished gasoline and Diesel and kerosene into pipelines at prices such that we would tell OPEC to go pound sand… instead, we stay on the hook to OPEC oil and sell our coal to China while shipping jobs there. This is not an accident.
wacko
” 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. “
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.
David,
A valid synopsis!
Consider also that US interest payments on our national debt, much of it owned by China through their purchase of US Treasury bonds, bills, and notes, will be sufficient to fund China’s aggressive expansion of their naval and air forces.
We are paying them to get another arms race going, a race that we will be severely disadvantaged in because of our bankrupt Treasury and imbecilic energy policies.
MtK
War with China ? to what end ?? The only player that would gain out of such an event would be the USA, in potentially wiping out out most of their foreign owned debt. But then of course nobody would lend to them ever again 🙁
Some of you blokes need to keep taking the tablets 🙂
David Archibald.
Thanks. Thought provoking.
Here are more details for the commercial side of China’s coal to fuel.
Yang and Jackson (2012 Fig 2) report that China’s gasoline consumption in 2010 was about 72 million tons and its methanol production capacity was about 38 million tons. Furthermore “at full capacity the coal-based methanol industry would be still able to substitute more than half of China’s gasoline supply by 2015.”
“Roughly 1.4 t of methanol can replace one ton of gasoline (Li, 2008). Because methanol is usually priced at one third to one quarter the price of gasoline (Table 1), blending methanol in gasoline in China is currently profitable, even if illegal in some places.”
“In light of recent developments in China, US policy researchers may re-examine the US experience and consider how China’s growing methanol economy could affect coal and other raw material prices and whether methanol fuels might make a comeback in the United States.”
China’s growing methanol economy and its implications for energy and the environment, Chi-Jen Yang , RobertB.Jackson Energy Policy 41 (2012) 878–884
See also the followup:
China’s coal price disturbances: Observations, explanations, and implications for global energy economies, Chi-Jen Yang, Xiaowei Xuan, Robert B. Jackson, Energy Policy 51(2012) 720-727
Yang et al., provide a detailed estimate of the costs of coal based methanol in China, which appears to be competitive with gasoline.
Geez, this below seems a bit over the top when you consider that in recent times the US have not required any other party or assistance of any sort to start a war.
” 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. “
Steven Mosher says:
May 24, 2013 at 2:45 pm
For your consideration: http://www.iias.nl/sites/default/files/IIAS_NL59_3233.pdf
China has 1,500 museums of national humiliation. Why would that be?
Oh look! Someone has started a Boycott China website: http://www.boycott-china.net
A US China war is in neither’s best interest. Where would the US get all of our cheap products so much in demand here and where would China get millions of dumb customers with lots of money to buy all their cheap crap? China is an excellent example of how well facism can work. Communism has morphed into facism just as in the US free enterprise has morphed into crony capitalism on its way to facism. Seems that trade can keep the peace up to a point, until someone runs out of resources the other one needs and decides they are strong enough, or the other is weak enough, that they can just take what they need. That is the real danger. Peace through strength is the key. Giving away our nuclear weapons through stupid treaties is the biggest danger to the US right now. Obama is the personal incarnation of that danger.
Whats the problem? Its what all western leftists want.. Then they can see about saving the world when their entire family is sent off to a reeducation (slave labor) camp for a few generations..
Im not even sure I would fight for them.. In fact I would not.. So after all our professional solders are killed in battle they would have to turn to people like me and my son to defend these vile despicable progressives.. Both of our lives are far to valuable to throw away on BS liberal democracy..
Let the women and non white North Americans and Europeans fight for their government.
Let them bleed out their favorite sons and daughters..
The only time I/we get put to the front of the line is when its time to die? I think not.