25/03/2010 - 00:00

Peak Oil presents an opportunity

25/03/2010 - 00:00

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Ample supplies of low-grade black and brown coal could provide a solution to oil shock.

A GROWING number of international oil industry experts are warning that the world is rapidly approaching what’s called Peak Oil, the point in time when the maximum rate of global petroleum extraction is reached, after which production begins tumbling.

Turkish-born Fatih Birol, chief economist of the International Energy Agency (IEA), believes the market power of the very few oil-producing countries with substantial reserves – primarily Middle Eastern producers – is set to be markedly boosted as the imminent oil crisis begins taking a grip from this year.

“The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong,” Mr Birol said.

“One day we will run out of oil; it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day.

“The earlier we start the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money, and we should take this issue very seriously.”

Although an expert Kuwaiti team – Ibrahim Sami Nashawi, Adel Malallah and Mohammed Al-Bisharah – in a February 2010 article in the specialist journal, Energy & Fuels, disagrees with Mr Birol on the year of Peak Oil (their date is 2014 instead of 2020) they back his warning on increasing Organization of Petroleum-Exporting Countries (OPEC) market power.

According to the Kuwaitis, non-OPEC production peaked at 39.6 million barrels/day in 2006 and is now falling at 5.6 per cent annually.

Non-OPEC production will be down to 20mmbbl/day by 2020, only a decade away.

The Kuwaitis back their words with numerous graphs of individual country production profiles.

Great Britain’s production is shown to just about disappear by 2020.

Indonesian production falls by two thirds, as does Norway’s and Mexico’s.

So, irrespective of who turns out to be correct on the Peak Oil year – whether it’s 2014 or 2020 – it’s well and truly on the horizon, meaning Mr Birol’s timely advice that the sooner we begin preparing for an era without abundant and easily accessible oil, the better.

State Scene has been aware of this imminent crunch for some time, primarily because of several in-depth conversations with Perth scientist and onetime oil and coal geologist, David Archibald, who not only studies such crucial questions but has investigated remedies for Australia, and in particular, Western Australia.

His researches show that, by 2015, Australia will have slumped from being 66 per cent oil self-sufficient to just below 30 per cent (so two in every three barrels of oil consumed will be imported and our trade deficit will inevitably skyrocket).

In 2001, Australia was 85 per cent self-sufficient in liquid fuels.

Mr Archibald said the Australian Institute of Petroleum’s monitoring showed Australian motorists, farmers and heavy transport haulers already faced precarious access to fuel.

“A large proportion of our oil supply and refined product supply passes through the Sunda Strait between Java and Sumatra,” he said.

“The Somali pirate problem has shown just how disruptive a handful of unpleasant individuals with primitive weapons can be to shipping.

“The merest unpleasantness by a foreign government in South-East Asia would bring the Australian economy to a halt within a few weeks.

“Moreover, Australia’s refining industry is well aware of the stock problem, but it wants someone else to pay for the carrying of additional stocks.”

He said Japanese refiners and distributors were required to carry 70 days of stocks and Australia should have at least a similar level of strategic stocks, either taxpayer funded and owned by the federal government or consumer funded and carried in our refinery and distribution system.

“We cannot rely upon the oil exploration industry to get us out of this problem and we don’t have to rely upon it,” Mr Archibald added.

“If the Rudd government refuses, then it’s essential that the Coalition parties go into the coming election campaign with a policy that borrows ideas from Japan and looks to the way America’s Strategic Petroleum Reserve operates.”

But the good news is that despite the coming collapse in our liquid fuel self-sufficiency, technologies exist that could make Australia 100 per cent self-sufficient, even though new oilfields are unlikely to be found here or in politically reliable parts of the world.

Mr Archibald said the starting-point in moving towards self-sufficiency was the fact that $A70 per barrel of oil is the price at which coal-to-diesel plants offer attractive rates of return.

Throughout this month it’s been hovering just below $A90/barrel.

Australia has an abundance of low-grade black and brown coal, both of which, although unsuitable for export, are ideal feedstock for liquid fuels production.

“A lot of this coal is found where there is no need for power stations and this low-grade coal could be put through coal-to-diesel plants,” Mr Archibald said.

There are two methods of obtaining liquid fuels from coal – coal liquefaction and the Fischer-Tropsch process, with the latter adopted on a large scale by South Africa in response to apartheid-era trade sanctions.

“With the Fischer-Tropsch process, coal is burned in pure oxygen to create a synthesis gas that’s catalysed by an iron or cobalt catalyst to long-chain liquid hydrocarbons,” Mr Archibald said.

“This process is very robust. In the mid 1990s, the South African energy and chemicals company, Sasol, managed to run a plant on coal with 30 per cent ash content at an operating cost of $US7/ barrel.”

He said the $3.5 billion Perdaman urea plant proposed for Collie was similar in that it would use coal as a feedstock to produce synthesis gas.

“The world’s first commercial coal liquefaction plant was brought on line by China’s biggest coal-mining company, Shenhua Group, in Inner Mongolia late last year,” Mr Archibald said.

It has a production capacity of 9mmbbl annually. Shenhua plans to triple that, and then triple capacity again.

“Liquefaction is at least 14 per cent more efficient than Fischer-Tropsch, but requires a higher quality, preferably hydrogen-rich, coal as its feedstock,” Mr Archibald said.

“The Surat Basin coals of Queensland would be ideal for coal liquefaction.

“Western Australia has billions of tonnes of black coal and lignite suitable for coal to diesel, including: the northern Perth Basin’s coals near Eneabba; the Collie Basin’s coals and billions of tonnes of lignite in deposits between Esperance and north-east of Kalgoorlie.

“The Kalgoorlie region alone consumes 5mmbbl of diesel annually, which equates to 14,000 barrels/day. This is an ideal starter size for a Fischer-Tropsch plant.

“There are at least 50 billion tonnes of lignite in Victoria’s Latrobe Valley, and other lignite deposits in South Australia.”

Sasol plans building an 80,000 barrel/day plant in Indonesia and it will eventually boost this to 1mmbbl daily, about the level of Australia’s liquid fuel requirement.

“Why should Australia deny itself liquid fuel supply security when our neighbours are going hell-bent-for-leather?” Mr Archibald asks.

“Coal-to-diesel plants dispersed around our coalfields will provide Australia with great protection against supply disruption – something that’s urgently needed.”

With Canberra incapable of looking beyond an election, the responsibility for securing WA’s future liquid fuel needs for the agricultural, mining, heavy-haulage and private motoring falls on the state government.

Over to you, Mr Barnett, and your mines, energy, agriculture and regional development ministers.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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