How Much Does Coal-to-Liquid Cost?

Germany never had oil fields. Though the Nazi regime has been capable of putting in motion hundreds of thousands tanks, boats, trucks, planes, and other vehicles that used liquid fuels (and we do remember it !). During the Apartheid, Southern Africa was banned from importing oil, and though the country had cars that were not parked all year long. Question: how did all these people manage to ruen their cars and other means ? The answer takes three letters: CTL, for “coal to liquids”, a technology known since the 1920’s, and that allows to… turn coal into liquid fuels.

The basic idea is pretty simple: you take coal (that contains carbon, but has half the proportion of hydrogen that oil has), bring in hydrogen, and at the end you get liquid fuels. Technically there are two ways to operate such a transformation:

With the first process, the gas is obtained by reforming coal with water vapour (then giving a mixture of H2 + CO + CO2), and in this case it will be necessary to remove some hydrogen to get heavier molecules.

As the process of gasification has been designed by two engineers, Fischer and Tropsch, the “coal to liquids” or “gas to liquids” technologies are sometimes designed under the expression “Fischer-Tropsch process”.

The liquid fuels obtained are close to diesel oil, and are therefore perfectly suited to terrestrial or aerial vehicles.

The overall yield of this process is around 50% (60% is the theoretical limit): the energy enclosed in the fuels coming out of the process represents about half of the energy contained in the coal at the beginning. If we want to capture and sequestrate CO2 on top, it removes an extra 20% of the initial energy.

A Fischer-Tropsch plant of 100,000 tonnes per year costs roughly 250 millions euros (it roughly costs 100,000 euros or dollars to have the capacity to produce 1 barrel per day, that is 50 tonnes per year). With a capital cost of 10% to 12%, the fuel produced costs 300 € per tonne, or 40 to 45 euros per barrel (it’s almost half if capital is much cheaper). Then we must add the cost of coal, knowing that one tonne of coal will lead to 2,5 barrels of fuel (on the basis of half the initial energy). If coal is priced 100 dollars per tonne it adds 40 dollars (say 30 to 35 euros) per barrel. Of course, if the plant is at the exit of the mine, with coal at 20$ per tonne, only 8 dollars per barrel are needed for coal purchase.

All included, turning coal to liquid becomes competitive for someone who buys coal on the international market (@100 dollars per tonne), without capture and sequestration, when oil is over 100 dollars per barrel.. With coal priced 20$ per tonne and cheap capital, it is possible to go down to 30 dollars per barrel of synthetic oil.

If we add CO2 capture and sequestration, we get only 2 barrels of liquids per tonne of coal (the capture process uses the rest), and we must add roughly 80 dollars – for two barrels – to manage this extra process. In such a case the initial energy enclosed into a tonne of coal will end:

Of the initial tonne, 600 kg will therefore be used – that is burnt – for the liquefaction process and the capture process, and the combustion of this 600 kg will lead to roughly 1,5 tonne of CO2. This operation, with a minimal cost of 50 dollars per tonne of CO2 captured, will cost roughly 80 dollars (40 dollars per barrel of synthetic fuel), hence the value mentionned above.

At the end of the day, a barrel of synthetic oil will cost 150 dollars if capital costs are high, coal is bought on the international market, and we want to avoid most CO2 emissions in the liquefaction plant (which does not avoid emissions when the fuel is used). If the plant is built on top of the mine, with CO2 capture, then the cost can probably go down to 100 dollars per barrel, but not much less.

But in the latter case coal mines are not necessarily located close to places that are suitable for CO2 sequestration. Aquifers or depleted gas reservoirs are generally located in sedimentary basins, when coal mines not necessarily. And if CO2 has to be transported over hundreds or thousands of kilometres from the liquefaction plant, then costs can increase quickly.

Let’s get back to basics: if we consider producing CTL, it’s to replace oil that we have a hard time doing without. It is therefore not totally stupid to see what figures we have to manipulate if we want to achieve a CTL production which is of a significant magnitude compared to our present oil consumption. Let’s suppose we want to produce with coal 50% of the world production of oil, which presently amounts to 4 billion tonnes per year, or a little above 83 million barrels daily.

On the investment side, we should spend 40 millions times 0,1 million euros, that is… 4000 billion euros for the plants alone, plus what is necessary for CO2 capture and storage, investments in extra mines, in transportation infrastructure (because for such volumes we would have to build pipelines going from coal basins when today they go from oilfields, as well as the associated infrastructure in harbors), and it is likely that this extra investment would at least be equal to that in the plants alone.

Such amounts are at the same time a lot and… within reach. The oil and gas inductry is spending 300 billion dollars each year in exploration and production, so the amount mentionned above would represent “only” 20 to 50 years of investments of this industry. But on the other hand, finding 5,000 to 10,000 billion euros – or dollars – in a world that will experience repeatedly economic “hiccups”, precisely because of bottlenecks on energy supply, would not be a piece of cake !

And if we need one tonne of coal to produce 2 barrels in the “cleanest” way, it means that to produce 15 billion barrels or synthetic oil per year (or 40 millions barrels daily) we must find… 7 billion tonnes of coal per year, or the equivalent of the present coal production. Easy, or not ?

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