FURTHER THOUGHTS ON SYNFUEL

Welcome to Charge: the future of energy

by Daniel C. Sweeney, PhD


In past posts I have suggested that coal derived synfuels would likely play a major part in our transportation future. A couple of recent interviews with a couple of executives at Dakota Gasification, Inc. have caused me to reconsider.

Dakota Gasification operates one of the few commercial coal gasification facilities in the United States, perhaps the only one. And that gives them unique experience and insights.

Before I relate what was told to me, a little background is in order. Coal gasification has gotten a considerable degree of attention of late. The coal industry sees it as a technology to advocate if not to adopt because it has the potential to make “clean coal” a reality rather than just a slogan. Certain energy pundits like coal gasification because proven processes exist for converting coal derived syngas into various liquid fuels including diesel fuel, kerosene, gasoline, methanol, ethanol, and DME, and because coal resources are fairly immense. Parties dependent upon natural gas as a feedstock for chemical manufacturing, such as the ammonia and methanol industries, are very interested as well. And obviously folks making gasifiers and other conversion equipment are pretty bullish on the technology. And, just as obviously, the fact that U.S. coal reserves are so immense argues strongly for coal gasification as way to reduce or eliminate dependence upon foreign oil. The further fact that cheap, low grade lignite coal works splendidly in gasifiers is a bonus.

So why, I have repeatedly wondered, isn’t it happening? Why is there only one small commercial plant operating in the U.S. and few anywhere else? Now I think I know.

First a brief explanation of what gasification is in terms of the basic chemistry. A number of coal gasification technologies are extant today but the usual process, called partial oxidation, involves heating pulverized coal in the presence of oxygen or air to the point where the coal forms a gas but prior to combustion. The resulting gas, which is known as synthesis gas or syngas, contains hydrogen, carbon monoxide, a little carbon dioxide, and various contaminants whose presence will depend upon the composition of the individual coal feedstock.

Syngas may be used as an intermediate feedstock to make all sorts of chemicals including methane, methanol, ethanol, and analogs of petroleum fuels. Syngas can also be used directly as a fuel in turbines for generating electricity. Incidentally, syngas can also be produced from biomass, but that’s another story and the economics for that are questionable today.

Syngas happens to be the same stuff used in gaslights back in the Victorian era and a bit beyond. At one time it was used for cooking, heating, and even for fueling early internal combustion engines. Now it’s poised to make a comeback.

Or so it would seem.

Anyway, I asked the folks at Dakota if they had any plans to produce any kind of liquid fuel, either alcohol or petroleum-like synfuels, from coal derived syngas. No, was the answer. How about anyone else in North America? The answer there was more ambiguous.

As is well known today, Sasol in South Africa has been profitably operating coal-to- liquids plants for decades, although most of the liquid fuels used South Africa are still petroleum products. And Dakota management, as it turns out, are in almost constant communication with Sasol. They don’t think the Sasol model is necessarily very relevant in the U.S., however, because the Sasol experiment was initially government subsidized. Dakota officials believe that the private sector simply won’t assume the risk of building coal to liquids plants in the U.S. because the probable capital investment will be in the billions of dollars per plant installation for commercial scale production facilities capable of competing with conventional refineries on the basis of cost.

The other question, of course, is could such a plant operate profitably today if investment were forthcoming, and could a multitude of such plants reduce are reliance on foreign oil?

Given the importance of this question, one might assume that there have been many rigorous studies on the subject, but that turns out not to be the case. I have found only two studies, one performed by Princeton University, and the other by Mitretek, a heavyweight scientific and engineering research corporation that does a lot of work for the Defense Department.

Both studies are based almost entirely upon models and projections. Apart from the Sasol plants, there just aren’t enough gasification facilities in operation to provide the basis for an empirical study.

So what are the findings? When we’re somewhere in the neighborhood of $50 a barrel for crude—and that’s basement rather than the ceiling price—gasification starts to look good.

So gasification, here we go. Or do we? I keep thinking back on the remarks made by the Dakota guys. Princeton and Mitretek didn’t study their plant, but they’re in business and they’re making money. The thing is that they own their own coal mine, but they don’t think they can sell liquid fuels profitably, only methane produced from coal plus a few syngas derivatives which essentially are petrochemicals.

The other thing that makes me nervous is the whole idea of models. Frankly, I don’t trust them. A few years ago I saw innumerable models and projections for the hydrogen transition coming out of various think tanks and industry groups and government agencies and it was all smoke and wishful thinking. And of course we’re seeing the same thing in other areas of alternative fuels—oil shale, cellulosic ethanol, and coal bed methane. If one is to believe the proponents of any of the above, $30 per barrel is achievable now and our energy problems are on the verge being solved.

Projections made by proponents of any given fuel feedstock or processing technology must be assumed to be wildly optimistic until proven otherwise. My guess is that few if any of the alternative liquid fuels prove out until oil nears $100 per barrel. Which is probably coming, but when?

And when it does, one faces the further question of what alternative fuel is the most favorably placed, and, remember, cheaper always trumps cleaner. If shale oil comes to $30 a barrel, which I’m not saying it necessarily will, and everything else is a lot more, then what happens to everything else?

Of course any petroleum-like synfuel, and that’s really what shale oil is, will simply be dumped into the world petroleum market, and unless the oil shale fields suddenly come into full bore production that cheaply produced substitute won’t make much difference. Oil shale producers will sell at the world price and make more profit than the conventional oil guy, but the price of gasoline won’t come down by very much if at all. Only an alternative fuel which is truly alternative, i.e. is not part of the current petroleum distribution network can undersell oil, and course the petroleum producers would attempt to protect their markets in any way they could and keep that alternative from becoming mainstream.

If oil prices can be maintained at extremely elevated levels, synfuels from oil shale, unconventional natural gas, and from coal could probably all survive in the market, with the different producers experiencing varying profit margins according to the cost effectiveness of their feedstocks and their manufacturing processes. But investors will tend to gravitate toward the alternative fuel with the highest profit margin. If that proves to be oil shale, oil shale will get most of the money. If it’s synfuel from coal, then coal gets the outside investment.

At any rate, I am extremely doubtful that any of the alternative fuel manufacturers including the ethanol guys will ever be able to flood the market with cheap product and bring the per BTU prices crashing down. The oil manufacturers could do that in the old days because they could modulate the production of the oil fields very quickly. You can’t do that with a synfuel plant or an ethanol plant, at least not very easily. They usually operate at near peak capacity and they’re not pulling the feedstock out of the ground with a pump.

We may be able to gain a measure of energy security through crash alt fuels programs, but we need to stop telling ourselves that cheap fuel is coming back. Maybe someday decades from now that will happen, but it’s almost inconceivable with current technology or any conceivable enhancements thereof. From now on every drop of refined fuel is precious.


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We note with regret the untimely passing of Steve Irwin, whom we think was the most effective voice the environmental movement ever had. Combining irrepressible enthusiasm, an endearing stage presence, endless amusing antics, and almost ironically, an encyclopedic knowledge of zoology, he did much to communicate his passions to the world at large and to educate millions on the wonder and fragility of our natural realm.