NATIONAL AFFAIRS: by Joseph PoprzecznyNews Weekly
Energy self-sufficiency for Australia?
, September 2, 2006
Oil and gas multinational Sasol Chevron has proposed a scheme that could enable Australia to be self-sufficient in energy, reports Joseph Poprzeczny."Australia is at a cross-roads regarding energy supply and security for the 21st century." That's the opening line of the Perth-based Sasol Chevron joint venture's submission to the Senate Rural and Regional Affairs Transport Committee.
The submission continues: "The declining domestic supply of oil, combined with rising demand for transport fuels, is increasing Australia's dependence on oil imports when the cost and security risk of these imports is also increasing."
Few would dispute that this succinct assessment puts Australia's automobile, heavy transport and agricultural fuel requirements into a stark, realistic and unwelcomed perspective.
Since the release of the Sasol Chevron submission, the energy supply sector's peak body, the Australian Petroleum Production and Exploration Association (APPEA), has presented the same parliamentary committee with its assessment of Australia's liquid fuel position.
APPEA has warned that Australia's plummeting oil output showed no sign of reversing. As a sign of things to come, domestic crude oil output fell from 126 million barrels in 2004-05 to 113 million last financial year - a huge 10.3 percent drop which is unlikely to be reversed.
Understandably, this has prompted APPEA to warn that Australia faces the imminent prospect of hefty and ongoing trade deficits for its crude oil imports unless something positive occurs.
Without new discoveries, Australian crude oil output will make up only a third of its consumption within one decade. Clearly, if the so-called China Factor doesn't continue and the expected Indian Factor fails to eventuate, Australia's balance of payments and energy future look bleak.
"This forecast translates into an estimated trade deficit in crude oil and condensate of around $20 billion in 2015," APPEA's chief executive, Belinda Robinson, told the Senate committee.
Now, the one energy resource Australia has in abundance is natural gas, most especially below the seabed of the North-West Shelf - that is, off the Pilbara and the Kimberley coasts. And it's here that the Sasol Chevron submission makes sanguine reading.
The joint venture, which draws on the technological resources of both its parent companies, says it is able to convert natural gas into clean fungible liquid hydrocarbons - what is known in the energy sector as gas-to-liquids (GTL).
Sasol, which is headquartered in Johannesburg, was founded in 1950 to "manufacture fuels and chemicals from indigenous raw materials".
Chevron, headquartered in California, is the world's fifth largest integrated energy company.
Their joint submission highlights Chevron as a key North-West Shelf player as operator of the Barrow and Thevenard Islands oil fields and partner in the $11 billion Gorgon liquefied natural gas project which is expected to get the go-ahead early next year.
Chevron is also a partner in the long-producing North West Shelf venture and holds a 50 per cent stake in Caltex Australia, so is a significant nationwide retailer of liquid fuels.
The other 50 per cent is held by Australian shareholders.
How then do the two joint venturers propose to help Australia become self-sufficient in transport fuel so as to avoid huge and ongoing foreign exchange outlays?
Put simply, it is by resorting to conversion of natural gas - which Australia has in abundance off northern Western Australia - into liquefied fuel, thus a GTL process.
Sasol-Chevron's GTL method initially converts natural gas into a waxy substance called syncrude by mixing methane - the main component of natural gas - with oxygen to create a mixture of carbon monoxide and hydrogen.
"In a slurry phase reactor, the syngas is heated to 240 degrees Celsius and mixed with another catalyst to form various liquid hydrocarbons, yielding condensates and waxy syncrudes," the joint submission says.
The next phase, called Isocracking, upgrades the waxy syncrudes by separating heavier molecules, which are usually solid at room temperatures, and rearranges these so they are transformed into a liquid.
"This process yields lighter products such as synthetic diesel and naphtha which contain virtually no sulphur or aromatics," the submission says.
"The product split from this process is approximately 60-70 per cent GTL diesel and 30-40 per cent GTL naphtha with a small volume of liquefied petroleum gas."
Naphtha is an industrial feedstock that is used in the petro-chemical industry.
Sasol-Chevon has several plants on the drawing board that will be capable of producing GTL diesel.
One is in Qatar and it will soon be commercially producing 34,000 barrels of GTL per day (BPD).
Two extensions are already proposed for the Qatar venture which will mean that this Middle Eastern complex is headed for a combined output capacity of nearly 200,000 BPD.
And a contract for an identical plant was awarded last year in Nigeria, with production due to commence in 2009.
"GTL is cleaner than conventional diesel," the Sasol Chevron submission says.
"The properties of GTL diesel make it an ideal blending component to upgrade lower quality middle distillate streams to on-road fuel quality.
"In addition, GTL diesel is not in competition with other alternative transport fuels; it complements them.
"Specifically, GTL diesel has synergies with bio-diesel, opening up possibilities for blended GTL/Biofuels.
"GTL diesel has also been confirmed in independent laboratory tests to be readily biodegradable and non-toxic to marine organisms."
GTL diesel can be delivered by road tanker to service stations, just like presently used diesel fuel, with no need for expensive new infrastructure modifications.
The Senate committee was told that moving into GTL production was a capital-intensive investment with a 200,000 BPD project likely to cost upwards of $20 billion including offshore gas development.
Such an undertaking means the project would need to be constructed in stages with 66,000 BPD seen as an efficient initial first phase.
The committee was told that such a project would require coordinated support at the federal, state, regional and local governance levels.Indigenous source
But when fully operational it would mean Australia was in possession of an indigenous annual source of diesel totalling some 73 million barrels.
Australia's diesel consumption during the 12 months to October 2004 stood at 52 million barrels.
With about 75 per cent of the 73 million barrels being diesel from a 200,000 BPD plant, if now fully operational, it would have an output of around 55 million barrels of diesel or around Australia's current annual diesel usage.
"Sasol Chevron has been working since 2000 to pull together the many parties necessary to move an Australian GTL project forward," the submission said.
"With the current robust LNG market climate and LNG's long history, GTL must offer a more compelling value proposition to the gas resources holders to be successful.
"In Qatar and Nigeria, this has been achieved. In Australia, this has not yet happened. Australia faces a future of steadily increasing imports of transport fuels.
"Australia's natural gas resources, combined with Sasol Chevron's GTL technology, are available today to produce large volumes of environmentally-friendly synthetic diesel fuels.
"With a new industry the uncertainties and costs are somewhat higher than for established businesses, but so are the potential rewards."
The submission lists such rewards as including the emergence of a new value-adding market for Australia's natural gas reserves, development of strategically important gas infrastructure and, most important, the reduction of Australia's dependence on imported transport fuel.- Joseph Poprzeczny is a Perth-based freelance journalist and historical researcher.