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Oil Supply/ Peak oil not till 2025


kahuna1

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In reply to: subbii on Sunday 26/03/06 04:31pm

The story from the World's Finest Oil Newspaper first, then my commentary after.

 

Peoples Daily, 24 Jan 2005

 

China's first coal liquefaction scheduled to ease import burden

 

 

China's first coal liquefaction project is expected to begin operating in 2007 to ease import burden, with an initial annual oil output topping one million tons, Monday's China Daily reported.

 

Shenhua Group, one of China's largest coal producers, embarked on an ambitious project last year in Erdos, a city in North China's Inner Mongolia Autonomous Region.

 

By transforming coal into refined oil after a series of processes in an environment of high pressure and temperature, the Shenhua coal liquefaction project will offer an efficient way to quench China's thirst for energy.

 

"The project consists of two phases of construction, and after the second is complete the plant aims to yield five million tons of oil products annually and greatly reduce China's reliance on crude oil imports," Zhang Yuzhuo, vice-president of Shenhua Group Corp. Limited, was quoted as saying.

 

It is estimated that by 2013, ten percent of oil imports will have been replaced by coal-liquefied oil.

 

The coal liquefaction technique has drawn growing attention recently due to skyrocketing international oil prices.

 

"The fluctuating international oil market has a negative impact on China's robust economy, making coal liquefaction even more important in terms of energy safety and China's sustainable development," Zhang said.

 

According to Zhou Dadi, director of the Energy Research Institute under the National Development and Reform Commission, China would have to pay another 58.1 to 66.4 billion yuan (seven to eight billion US dollars) if the price of crude on the international market climbed by 10 US dollars per barrel.

 

Statistics indicated China's consumption of oil in 2003 topped 252 million tons, with net imports making up 91.1 million tons. And China's reliance on oil imports is expected to hit 60 percent by 2020.

 

A report released from the Ministry of Land and Resources states that China's coal reserves that can be directly utilized reached 188.6 billion tons by the end of 2002.

 

However, this coal-to-oil technique has faced critics in the past over whether its price is competitive. Some scholars doubted that coal liquefaction could turn a profit after the market price of coal climbed to over 500 yuan (60.2 US dollars) per ton.

 

In the feasibility report of the Yunnan Xianfeng coal liquefaction project, the cost of coal as raw material is calculated at 81.9 yuan (9.8 US dollars) per ton. And most enterprises use 90 yuan (10.8 US dollars) per ton as the benchmark when launching such projects.

 

"The surging price of coal, to a large extent, resulted from the growing fees in transportation and circulation," said Zhang. "The mine-mouth price remains almost the same compared with several years ago, and our mining costs saw no rise."

 

As the raw materials for the Shenhua project come directly from the Shenhua coal mine, the rising costs of transportation and circulation will bear no influence on the company's coal liquefaction project.

 

Moreover, international indicators show that if the cost of liquefied-coal oil ranges from 22 to 28 US dollars, the process is still profitable.

 

"We can further reduce the coal liquefaction cost by adopting domestic equipment, optimizing techniques and reducing energy consumption," Zhang added.

 

Currently, about 60 percent of the equipment involved in the first phase of the plant's construction is domestically made. And the figure is expected to rise to 80 percent when the second phase begins.

 

Although coal liquefaction promises to help ease China's oil shortage, huge potential risks are involved in its large-scale production which prevent the launching of similar projects.

 

"We are striving to reduce the risks by co-operating with world leaders in equipment supply and project contracts," Zhang said. "It took us four years to optimize the Shenhua coal liquefaction technique."

 

In December, Shenhua signed a contract valued at 54.8 million yuan (6.6 million US dollars) with Honeywell International, a world leader in the high-tech industry, to introduce Honeywell equipment to the coal liquefaction project.

 

Shenhua is also working on a series of coal transformation projects. It has signed letters of intention with Kerry Group and The Dow Chemical Company on coal-to-olefins and coal-to-polyolefin projects.

 

An insider who declined to be named said the National Reform and Development Commission is thinking of making coal liquefaction one of China's 10 key construction projects this year.

 

 

********

 

OK, quick comments ; price of coal has gone up too, and it's currently well above what most CTL projects were based on. The miners are claiming the 'mine gate' price hasnt gone up by anywhere near as much, so CTL is still economic for them.

 

As far as quantities, I'm going to repeat the key para

 

"The project consists of two phases of construction, and after the second is complete the plant aims to yield five million tons of oil products annually and greatly reduce China's reliance on crude oil imports," Zhang Yuzhuo, vice-president of Shenhua Group Corp. Limited, was quoted as saying.

 

5 million tons is 35 million barrels, or 100 000 barrels a day - and this is the flagship project for CTL, worldwide.

 

China currently imports about 2 million barrels a day. "Greatly reduce" nope. "Make a contribution towards" I'll buy.

 

Ian Whitchurch

 

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In reply to: ian_whitchurch on Monday 27/03/06 09:33am

Good points as always Ian,

 

I agree with you about this move by China being just a drop in the ocean right now.

The question is how much steam it gathers over the next 10 years, I suspect a lot more ... much like the tar sands in Canada and I suspect some time prior to 2010 we see Venuzuala move the sma e direction and possibly by 2015 we have 10 % of total demand covered by tar sands production. If China was to move in a serious way as time goes on the total by 2020 might be 3-5 million for coal liquificaation at best. In total maybe even 15 mmboe between the two ... or 15% of demand.

 

Who knows at this stage and some ground to cover. Either way for me the long term demand supply picture changing rapidly the longer out one looks.

 

As to the economic break even ... domestic coal in Australia gets only about 50% the price of export thermal coal ... so too for China but even worse. Suspect at worst the economic break even US$30- a barrel even now ... about the same as tar sands I suspect.

 

For me, I look at these tar sands and now coal liquification processes and then hear some person talking global warming and Kyoto targets ... and just shake my head. With Tar sands the energy lost to produce a barrel of tar sands synthetic crude is 25% ... so 25% more greenhouse gasses .... Coal Liquifiaction its a whopping 35% .....

 

Long live Kyoto ....

 

Must go and get some options to sell land in those Pacific Island nations before they are totally swamped :}

 

Cheers

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In reply to: kahuna1 on Monday 27/03/06 08:51am

Kahuna,

 

These are big-ass infrastructure projects, with massive lead times.

 

If it was going to gather steam over the next 10 years, they need to start figuring out sites, BFS's, railroads from production to the plant and so on now, and I see absolutely no evidence of this happening.

 

I see a lot of weight on the Chinese CTL (ie your post of 1/3), but when you dig, there isnt that much there - remember, that 5 million tons a year is after they get stage B built. Stage A is only 1 million tons, after all.

 

Ian Whitchurch

 

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In reply to: ian_whitchurch on Monday 27/03/06 10:09am

I hear you Ian ,

 

However disagree ..... the supply side picture for me has changed in the last 12 months and any gains for oil from here incremental rather than large at least till 2015 in my eyes.

 

In 2001 we ourselves had a pilot plant for oil shale which the nutters at Greenpeace drove out of business.

 

In 2003 tar sands production in Canada was at best tiny ...

Same year the Bush administration declared the Tar sands deposits as viable oil sources and added 184 billion barrels to the reserves of Canada.

 

Right now early 2006 a reasonable call for production out of Canada by 2015 would be or the order of 8 mmboe a day !! Now three years ago ... it was maybe 100k per day.

 

These schemes have a mind of their own. If you throw kyoto out the window as US has and China ignores anyhow ....

 

Might be small peanuts at this stage but the worst sort of sythetic coal conversion into oil I suspect is going to gain a large following in China.

 

As for us doing the same ... doubtful at this stage. Environmental impacts for CTL conversion much much worst than even oil shale.

 

Another factor ... whilst our balance of payments has been blown to bits by the fule import bill ... the new fields of Enfield and Stybarrow 2006 then 2008 and upgrtading of NWS then Pluto 2009 ... Gorgon 2012 Browse 2014 will see Australia go from importing net 150 mmboe a year to a net exporter of around 100 mmboe a year. very very big change and politically no need to change anything or add to the mix.

 

Will change for Australia by about 2025 slightly ... but with Pluto running out first in 2030 or so ... if even then and Gorgon and Browse not till 2080 and beyond .... pressure and political will to do something so dirty and messy very unlikely for many years in OZ. Especially since we already burn too much coal for power in the greenies eyes ....

 

My suspicion it will not happen here ... but we will be more than happy to eport as much coal to anyone else who wants to do it :}.

 

Only time will tell.

 

Oh and suply concerns being beaten up especially around Nigeria .... maybe some of the oil traders should read some history on the country ... makes Afganistan look positivly calm the last 20 years ... and thats even with Russia invading and the civil war.

 

Any country with 200 distinct ethnic groups who speak 150 diffent languages and run virtually since independance by despots ....

 

What can one expect ?

 

The oil still flowed with minor delays thru many a coup and uprising .... thinking its any worse now would be totally incorrect.

 

My own call for oil ... barring a massive problem somewhere ... doubt it goes over US$70- in 2006 .... and more likely to trade at US$50- than US$70- despite it being almost there right now.

 

Only time will tell

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In reply to: kahuna1 on Monday 27/03/06 12:24pm

"China's first coal liquefaction project is expected to begin operating in 2007 to ease import burden, with an initial annual oil output topping one million tons"

 

"The project consists of two phases of construction, and after the second is complete the plant aims to yield five million tons of oil products annually "

 

"Statistics indicated China's consumption of oil in 2003 topped 252 million tons"

 

 

So 1mt + another 5mt later and China's consumption was 252mt. Given China's growth rate of around 7-9% (although high prices may reduce waste) it is doubtful that the coal liquefaction at full capacity will not make up one year's increase in oil consumption.

 

 

G

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In reply to: geoq on Monday 27/03/06 07:33pm

Matthew Simmons has released their Macro Energy Outlook 2006.

 

http://www.simmonsco-intl.com/files/011806%20SOM.pdf is the URL - if it doesnt work, go to the site, then go thru "our research" into "current researchreports".

 

Lots of good stuff - more than I can summarise, or hit with a stick. OPEC projects, non-OPEC, canadian tar sands estimates, the works.

 

Go read it.

 

Ian Whitchurch

 

 

 

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QUOTE (ian_whitchurch @ Tuesday 28/03/06 11:51pm)

Hi Ian ....

 

Many thanks for that ....Matthew Simmons I think is a peak oil boy reading this stuff.

 

Was interesting to see for the first time someone admit to mine the nasty tar sands the demand on natural gas will grow. Takes about 20% of the oil extraced to heat the tar to 80 degree's.

 

On the whole found the thing as per normal with these sort of reports either skewed one way or the other.

 

In this case the view was purely American and biased to the peak oil end of the world sort of stuff. I notice he talked about OPEC supply coming on line out to 2010 ... but missed over 6 projects in the mega range outside OPEC ... not a word.

 

Well I couldn't see them mentioned on a quick read .

 

Also some errors or omissions closer to home ... I thought Enfield started late 2006 at 100 k bpd ? .... having read some of his other stuff ... it missed looking forward just for Australia ... Enfield/Stybarrow/Vincent in total 240 k bpd.

 

 

Oh and some of the projects not talked about by ommitiing virtually everything non opec in the ditty .... non opec and non US ....

 

Tengiz/Kololev expansion, Kazakhstan Chevron 298 to 450+

ACG magastructure ,Azerbaijan BP +400 (2009)

Kashagan Ph1 Kazakh Caspian Agip (Eni) 450 (2009

Karachaganak Ph3 & 4 Kazakhstan Eni and BG +200?

ACG megastructure Ph2 Azerbaijan BP +500 (2008)

 

I agree things will remain tight in 2006 but beyond .....

 

Very skewed report ... US bias ... peak oil bias .... and glossed over the fact that if something is not already in pre pre-production mode was not included either in the numbers or the outlook.

 

Annoys me no end these things ... Australia has natural gas reserves more than likely to top 240 trill .... Browse 30 plus Greater Gorgon likely 50 .... NWS PLuto ect ect .... so we have reserves able to produce around 5% of the worlds total LNG demand for 40 years ....

and have projects totalling epansions 25 million tons LNG in the next 8 years ... but on this wombats piece ....

 

Where the bloody hell are we ?

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