High Oil Prices Mean Invest in Coal-to-liquid Technology (ctl)

Who in their right mind would consider a Coal-To-Liquid Technology(CTL) investment when we have plenty of oil supplies? You should. Because we dont.

Yes, oil prices are high. But crude production has peaked. Output in all major fields is fixed, or is declining. New oil fields are smaller and harder to get at, and extraction techniques are getting more difficult and expensive. Energy demand around the world is rocketting. Oil prices are rising steeply. Increasing political unrest means uncertain supplies, and the markets hate uncertainty.

That suggests oil substitute fuels like liquid coal will be needed soon. The obvious oil substitutes-liquid natural gas, oil sands, biofuels, fuel cells, renewable sources and nuclear power can't meeting total demand at a reasonable cost for the next decade at least.

What is likely to be the solution? Large supplies of coal. Combined with a long-used proven technology which can convert coal into a clean pumpable liquid with low burnoff emissions- CTL. Both are now readily available at competitive costs.

There are vast available coal deposits in the USA, China, India ,Canada, and Australia, allowing enough liquid coal for scores, maybe hundreds of years, even if demand accelerates.

Note that the Middle East has declining oil and virtually no coal.

Once oil prices rise above $35 a barrel, coal-to-liquid technology providing liquid coal at $20-$30/barrel begins looking very attractive as an oil alternative. Presently oil prices remain above $60, show no sign of descending and could peak at $100-$150 a barrel - IF available from anywhere. This would potentially lead to gasoline at $8/gallon at US pumps and widespread recession.

Other technologies such as coal gasification and gas-to-liquids (GTL) are currently cheaper than coal liquefaction and so some companies afraid of a downturn in oil prices and seeking the best current investment returns may be tempted by those instead.

However China and the US-now the two major powerhouses of world industry-are likely to opt for liquid coal on the basis of huge cheap domestic supplies and the incentive of non reliance of volatile outside markets.

China is an fast awaking industrial giant. They need vast amounts of energy badly for electricity for factories homes and schools, have little oil but lots of coal. Trouble is, the coal is in the north, and industrial developments in the south, China is huge and the roads and railways are presently poor.

It's hard to transport solid coal then burn it and create lots of pollution, but much easier and ultimately cheaper to pump clean liquid coal by pipeline.

The government there doesn’t argue or debate issues with the public-with collaboration with Royal Dutch Shell, they have already started to build a liquid coal plant in the Ningxia region, with three more on the way.

Also, consider the car. Demand is growing worldwide. But so are demands for cleaner more efficient vehicles. Liquid coal can be used to make both gasoline or diesel fuel. But the most ecofriendly efficient car of the near future probably WON'T be a electric-gasoline hybrid but an electric-diesel hybrid. This will have similar refinement and performance but far better overall miles per gallon, lower emissions.

Also note that China and India plan to break into the car production market and will be in a powerful position to provide cheap clean fuel-efficient cars to their own vast markets and overseas.

Extra pressure on car manufacturers (dependent on crude oil and suffering from high production costs) and already hovering on the brink of bankruptcy in the US? Or to switch production heavily towards hybrids?

Liquid coal - way to go!

Present coal plants can't and wont use oil for a fuel- burn profile is wrong and way too expensive. However any existing coal plant that presently burns coal will be able to burn liquid coal too. Efficient, kinder to the environment, no sulfur, mercury or ash AND less smells dust and fumes.

Expect politicians to push CTL and give it an easy tax ride for the same reasons they are presently favoring biofuels like ethanol:

(1) there’s the lure of a vote winning rural job-creation side from an industry otherwise viewed as declining.

(2) Many Western voters and investors are getting worried about the security implications of depending on their energy supplies from increasingly unfriendly or unstable nations.

(3) Many environmentalists, given the right conditions (e.g. high carbon capture at CTL plants, alternatives like nuclear energy), are likely to warm to CTL because of its overall cleaner profile.

Many firms are already investing in CTL. Forget oil and other oil substitutes for the moment. Look into it now if you are interested, and look for CTL specialists like Headwaters, Syntroleum Corp, and Rentech, and particuliarly, the highly experienced South African company, Sasol.

Author: Mick Madigan

What is an Independent Oil and Gas Company?

The basic definition of an Independent Oil and Gas Company is a non-integrated company which receives nearly all of its revenues from production at the wellhead. They are exclusively in the exploration and production segment of the industry, with no downstream marketing or refining within their operations. The tax definition published by the IRS states that a firm is an Independent if its refining capacity is less than 50,000 barrels per day on any given day or their retail sales are less than $5 million for the year. Independents range in size from large publically held companies to small proprietorships. Many independents are privately held small companies with less than 20 employees. The Independent Petroleum Association of America (IPAA) recorded in a 1998 survey that “a large percentage of independents are organized as C Corporations and S Corporations at 47.6% and 27.7%, respectively. A total of 91.4% of responding companies are classified as independent (versus integrated) for tax purposes. More than one fifth of responding companies reported their stock is publicly traded. “

Independent producers derive investment
capital from a variety of sources. A 1998 IPAA survey reports that 36.2% of capital is generated through internal sources followed by banks 27.8 % and outside investors (oil & gas partners) at 20.3 %.

Supplying Future Energy Needs

The U.S. Energy Information Administration (EIA) states in their Annual Energy Outlook 2007, “Despite the rapid growth projected for biofuels and other non-hydroelectric renewable energy sources and the expectation that orders will be placed for new nuclear power plants for the first time in more than 25 years, oil, coal, and natural gas still are projected to provide roughly the same 86-percent share of the total U.S. primary energy supply in 2030 that they did in 2005.” In this report the EIA also predicts consistent growth in U.S. energy demand from 100.2 quadrillion Btu in 2005 to 131.2 quadrillion Btu in 2030.

Maturing production areas in the lower 48 states and the need to respond to shareholder expectations have resulted in major integrated petroleum companies shifting their exploration and production focus toward the offshore in the United States and in foreign countries. Independent oil and gas producers increasingly account for a larger percentage of domestic production in the near offshore and lower 48 states. Independent producers’ share of lower 48 states petroleum production increased form 45 percent in the 1980’s to more than 60 percent by 1995. Today the IPAA reports that independent producers develop 90 percent of domestic oil and gas wells, produce 68 percent of domestic oil and produce 82 percent of domestic gas. Clearly, they are vital to meeting our future energy needs.

Author: Chris Jent