By Serge Perineau
President, World CTX
Converting coal into petroleum looks like a new alchemy to our fellow human beings, most of whom remain unaware it is possible. Given the availability of coal and the scarcity of oil in many regions of the world, however, several nations and companies have shown great interest in this industry, leading to tangible developments since the beginning of this decade.
Until 2009, commercial experience was limited to that of one company, Sasol, in South Africa for liquid fuels, and Dakota Gas, in the U.S., for natural gas. As a result of a tremendous research effort, demonstration plants have proven the viability of different technologies with near-commercial capacities and, today, more plants are being constructed than ever before. Considerable information on coal conversion has been made available under World CTX’s impetus, allowing benchmarking with other energy routes in terms of logistics, environmental impact, and economics. This article puts coal conversion in this perspective and provides an overview of present industrial developments.
CTL, CBTL, and Other Acronyms
CTL (coal-to-liquids) generally refers to the conversion of coal (including lignite) or petroleum coke into liquid fuels. Biomass is often associated with the coal. Some projects are referred to as CBTL (coal/biomass-to-liquids), but the simpler expression CTL is often maintained for CBTL projects. In this article, CTL encompasses both CTL and CBTL. It is important to clarify that BTL (biomass-to-liquids) is not considered within the scope of CBTL. The respective models of BTL and CBTL are fundamentally different, mainly due to the capacities of the units, which are significantly smaller for BTL than for CBTL. In addition, due to the image of BTL in public and political circles as a fully renewable, green energy source, BTL can enjoy subsidies that CTL cannot.
The principle of converting coal to liquid fuels is the same as converting it to other high-value hydrocarbons, as all processes consist of transforming molecules contained in coal and adding hydrogen to them.
CTL: Already a Long Story…
CTL was first carried out at the beginning of the 20th century in Germany, where two technology routes were developed and patented: the “indirect route” by Franz Fischer and Hans Tropsch and the “direct route” by Friedrich Bergius. However, these processes became uncompetitive with the discovery of large and easy-to-produce quantities of crude oil in the 1950s. Later in the century, in order to secure its petroleum requirements, South Africa began an ambitious industrial CTL program, which resulted in several decades of global leadership.
The oil shocks in the 1970s and 1980s spurred the U.S. to invest billions of dollars in research in CTL and to build the first coal-to-SNG (substitute natural gas) plant in North Dakota; then lower oil prices in the 1990s led to reduced attention in the area. The increase in the price of crude oil at the beginning of the 21st century generated new interest in CTL, particularly in China and the U.S.; projects were launched in both countries. These projects resulted in demonstration plants in China, whereas in the U.S. new environmental policies and the development of shale gas (and potentially gas-to-liquids units) have slowed the pace of progress. Today, seven conversion plants are commercially operating in China and 100 projects are being carried out globally (see the cover story in this issue for a more detailed discussion).
The comparative availability of crude oil, natural gas, and coal on a global basis is universally known. Access to adequate petroleum products is critical to the independence and development of countries, because it is linked to needs for transportation and defense—where liquid fuels cannot be substituted, at least in the medium term. Although reserves and resources of fossil energy are often discussed on a global basis, their geographical repartition holds strategic importance, as conventional crude oil and natural gas are generally located far from the regions with the highest energy consumption, while coal and lignite are fully available in most of them.
In remote places rich in coal, transportation can be expensive or sometimes impossible without heavy investments in railways. Converting this coal to liquid fuels or gas then makes sense, for either local consumption or transportation by pipe, which requires less capital expenditure and has lower operating costs than railways.
Coal can be converted to liquid fuels under several processes, essentially (i) the indirect route and (ii) the direct route. These pathways are represented in Figure 1, with pictures of commercial and demonstration plants, which have capacities between 2000 and 20,000 bbl/day.
The first route is referred to as “indirect” because a first step consists in producing an intermediate: synthetic gas (syngas), composed of carbon monoxide and hydrogen. In the second step, syngas is used as a feedstock in four main different processes:
- Fischer–Tropsch synthesis: liquid fuels are synthesized from the molecules of carbon and hydrogen contained in syngas
- Methanol-to-gasoline: methanol is synthesized from syngas and converted to gasoline
- Production of petrochemicals: once methanol has been synthesized, chemical derivatives are produced as in conventional petrochemical industry
- Methanation: methane (SNG) is synthesized from the molecules of carbon and hydrogen contained in syngas
In the direct route, coal is pulverized and mixed in recycled slurry in which hydrogen is added under pressure; Shenhua is operating the only demonstration-scale plant.
Both indirect and direct routes have respective advantages, in terms of versatility and choice of outputs (more diesel or more naphtha). Most projects today are based on indirect processes, mainly due to the higher level of knowledge accumulated by experience and research; this was the case at least until Shenhua’s Direct CTL plant was placed into operation.
Sustainable Development: Two Levels of Analysis
CTL is a chemical step included within a long energy channel. It is important to assess its environmental footprint at local and global levels. Local relates to the environmental impact at the place where the material is mined, converted, and consumed; global is linked to the greenhouse effect.
The environmental impact of coal mining is important to manage, but is outside the scope of this article. The second step is precisely CTL, which has similar characteristics to chemical and refining operations. Water requirements can be a concern. Studies are being made to decrease water needs, but scarce availability can make projects impossible in some areas. The solid wastes generated by CTL processes are similar to those produced by power plants and used in the same applications. The treatments of gaseous and liquid effluents are similar to the ones applied in the refining industry and do not raise particular questions.
The third and last step is the consumption or combustion of the fuel. As CTL fuels result from a synthesis process, they are significantly cleaner, notably in terms of sulfur, than conventional fuels produced from crude oil. Vehicles using these fuels then generate cleaner emissions, which benefits air quality, notably in cities.
The global footprint is a major stake for any energy channel. Coal, the most carbonaceous fossil fuel, is the raw material for CTL, which means that the starting ratio of carbon versus hydrogen is the largest. Therefore, for a given amount of energy production, the CO2 emissions are higher with coal than with natural gas or petroleum. In addition, CTL, as an intermediate process between mining and final combustion, features energy consumption which also results in CO2 emissions.
It is useful to compare the net CO2 emissions of a liquid fuel produced from coal to those of a conventional fuel. This is done in WTW (well-to-wheels) analyses, where the total greenhouse gas generation is analyzed: primary extraction (i.e., coal mine vs. crude oil well), transportation of primary feedstock, conversion/refining, transportation of finished product, and final combustion. The WTW analyses implemented by several research centers and institutions have generated consistent results. In this article, we include the results based on previous publications from the Princeton Environmental Institute (U.S.), recognized for its contributions to coal and biomass mixed conversion improvement. The results of the Institute’s analysis are summarized in Figure 2.1
Global Footprint Mitigation
As shown on the left side of Figure 2, greenhouse gas emissions are 70% higher with CTL diesel than conventional diesel. Researchers are focused on two routes to mitigate the global footprint of coal conversion.
Carbon Capture and Storage (CCS)
CCS consists of purifying, compressing, and storing the CO2 underground. For this analysis, CCS is applied to the CO2 produced in the CTL plant.
CCS is often seen as a non-feasible technology, mainly due to the current economics. To date, this may be true for air-fed power plants where CO2 needs to be separated from nitrogen after combustion; analyses have shown that 80–90% of the costs are based on that separation called “capture”. CTL offers a valuable advantage in this field: Because no nitrogen enters the plant, CO2 emitted by CTL processes is free of nitrogen, so that capture is not necessary. The cost of CCS is then bearable, as has been demonstrated during operation and over a decade of CO2 sales at the SNG plant in North Dakota (U.S.), where the major part of the CO2 is exported for enhanced oil recovery. When CO2 has an economic value, CCS then becomes “carbon capture, utilization, and storage” (CCUS). Research is also being conducted on CO2 as a raw material for chemicals.
The comparison summarized in Figure 2 demonstrates that, thanks to CCS, the WTW footprint can be reduced by 11% compared to conventional diesel.
The carbon contained in biomass comes from the atmosphere. Therefore, the greenhouse gas footprint of consuming biomass feedstock is negligible. When CTL diesel is produced using coal and biomass, the aggregate greenhouse footprint is decreased. When CCS is implemented, the carbon coming from the biomass, thus from the atmosphere, is finally sequestered, resulting in negative net CO2 emissions: This is the exact contrary of venting the CO2 associated with hydrocarbons produced from underground to the atmosphere. Figure 2 includes the CO2 emissions for various cases of biomass addition with or without CCS.
Three key points related to biomass addition must also be considered:
- By guaranteeing a high temperature, coal improves the yield of biomass conversion compared to BTL.
- Biomass collection is restricted to a limited area to keep logistics cost effective and reasonable and also to limit the associated carbon footprint (a 200-km radius is often quoted).
- There are some technical problems associated with gasifying both coal and biomass, in terms of process and equipment, but solutions are being developed.
The electricity required to operate the CTL plant is usually generated on site using coal. Electricity generation can be installed with capacity significantly higher than the CTL plant needs, resulting in an operation referred to as polygeneration. Polygeneration allows optimizing the plant operation, which implies reduction of costs and additional benefits in terms of carbon footprint. These additional benefits, which can be allocated to both outputs in several ways, are not quantified in Figure 2.
As is shown in Figure 2, liquid fuels produced from coal in a CCS-equipped CTL plant generate approximately 11% less CO2 per liter of fuel compared to conventional fuels produced from crude oil, although CO2 emissions are 70% higher if CCS is not applied. The addition of biomass to coal brings significant reductions, especially if combined with CCS: The carbon footprint is then reduced by almost 50% in the case where 20% of feedstock is biomass. If 38% of the feedstock is biomass and CCS is applied, the CO2 emissions for diesel are reduced by 83% compared to diesel from crude oil.1
CTL is recognized as a capital-intensive industry, with capital expenditures expressed in billions of dollars. Reported investment costs are between US$80,000 and US$120,000 per daily barrel installed.
Competitiveness is commonly expressed with the price of crude oil equivalent. Given the level of capital expenditure, the calculation of this equivalent price is contingent upon the method through which the cost of capital is taken into account. Crude oil price equivalent will also depend on the price of coal, power (bought or sold by the plant), manpower, and other classical parameters in the industry. As a result, figures should be considered with caution. It is generally accepted, however, that prices of crude oil equivalent vary between US$60/bbl and US$90/bbl.
The return on capital engaged in CTL projects will primarily depend on the price of crude oil and the cost of construction associated with the cost of capital. The cost of construction and the cost of capital are known when a project is decided. However, the volatility of the price of crude oil will remain over the coming decades, which often makes project financing difficult.
In the last five years, major technology improvements have been achieved and several coal conversion units have been started. Many coal-rich countries and mining and oil companies conduct technical programs in their own research centers, often through international cooperation. Subjects include the optimization of the processes described earlier and catalysts, as well as new areas such as catalyst improvement, underground coal gasification, plasma gasification, CTL+algae systems, and CO2 utilization. Also, through various publications and conferences such as the World CTX (www.world-ctx.com), the conversion industry monitors the results obtained in demonstration plants, which are accumulating tens of thousands of hours of experience.
In terms of industrial development, South Africa, with a 160,000 bbl/day capacity, has been the only country producing fuels from coal for decades. China is now by far the most active country in developing new projects. CTL production in China, begun in 2009, has reached 29,000 bbl/day in four plants and is expected rise to more than 310,000 bbl/day by 2016.
SNG production has been limited to North Dakota up to now, with 4400 Mm3/day capacity. Coal-to-SNG units are being constructed in Korea (1900 Mm3/day) and in China (with four units totalling 86,000 Mm3/day capacity, all of which are complete or nearly complete). India is active as well, with a coal gasification plant to be operational in 2013 to replace imported natural gas.
The production of methanol and derivatives from coal is also developing, principally in China. Starting gradually in 2009, the production of monoethylene glycol on one side and olefins for polyethylene and polypropylene on the other side is now reaching capacities of 1.7 million tons per annum.
These investments in production units are complemented with important supporting capital expenditures, such as a new CTL-devoted catalyst production facility with an annual 48,000 tons capacity (12,000 tons in phase 1, under construction) and the pre-approved Xinjiang-Guangdong-Zhejianga pipeline crossing China from west to east for transporting SNG with an 82,000 Mm3/day capacity.
Numerous less-advanced projects are being pursued in other countries such as Australia, Colombia, Indonesia, Mongolia, Russia, and the U.S.
As coal is fully available in most energy-consuming regions, CTL will remain driven by energy security concerns and logistics gains. Greenhouse gas emissions are a key environmental issue. Technology improvements, CCS, and the addition of biomass open up opportunities for mitigating the carbon footprint in a more efficient way than conventional liquid fuels. Various technologies have proved their viability, opening the way to the construction of many units, most of them located in China.
Coal conversion is capital intensive. Once the cost of construction and financing is known, project profitability will be subject to the volatility of crude oil prices and the cost of coal. With crude oil price around US$90/bbl–US$100/bbl, CTL is competitive. Further improvements will result from the intense research being actively pursued. This development and the lessons from demonstration plants in China are paving the way for this industry’s present development. International cooperation has played, and will continue to play, a key role in progress related to technology, the environmental footprint, and the competitiveness of CTL.
- Private communication from Robert Williams (July 2013) based on G. Liu, E.D. Larson, R.H. Williams, T.G. Kreutz, X. Guo, Making Fischer-Tropsch Fuels and Electricity from Coal and Biomass: Performance and Cost Analysis, Energy and Fuels, 2011, 25 (1), 415–437.
The author can be reached at email@example.com.