ENERGY: by Joseph PoprzecznyNews Weekly
What can Australia do when the fuel runs out?
, August 8, 2009
Australia, within five years, will have slumped from being 66 per cent oil self-sufficient to just below half that, around 30 per cent, meaning two in every three barrels of oil consumed will be imported. By 2015 Australia's trade deficit will soar.
As recently as 2001, Australia was 85 per cent self-sufficient in liquid fuels.
But after 40 years of being largely self-sufficient, Australia is on the brink of becoming permanently exposed to potential supply disruptions with possible catastrophic consequences for the economy and national security.
The impact of such a dramatic reversal - from 85 to 30 per cent self-sufficiency over 15 years - in our terms of trade in this strategically crucial commodity will be on a par with the global financial crisis that has brought about such a sudden turnaround in economic policies by Canberra.
According to independent Perth energy analyst, David Archibald, Australian Institute of Petroleum monitoring shows that Australian motorists, farmers and the heavy transport operators already face precarious access to fuel.
Archibald is author of the popular book, Solar Cycle 24 -Why the world will continue cooling and why carbon dioxide won't make a detectable difference
, that scientifically debunks the Western world's present anti-carbon hysteria. He argues that, since carbon dioxide has virtually no impact upon the earth's temperature, its output is not deleterious.
About Australia's impending fuel predicament, Archibald says: "A large proportion of our oil supply and refined product supply passes through the Sunda Strait between Java and Sumatra. The Somali pirate problem shows just how disruptive a handful of unpleasant people 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 couple of weeks. Australia's refining industry is well aware of the stock problem, but they want someone else to pay for the carrying of extra stocks.
"In Japan, the refiners and distributors are required to carry 90 days of stocks. Australia should have at least a similar level of 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."
According to Archibald, Canberra, in the national interest, needs to make urgent farsighted decisions, that look far beyond the three-year election cycle, on the nation's liquid fuel situation.
If the Rudd Government refuses to do so, then it's essential that the Coalition parties go into the forthcoming election campaign with such a policy that can borrow ideas from Japan and the way the United States' strategic fuel reserve is managed.
Despite the imminent collapse in our liquid fuel self-sufficiency, technologies exist that could enable Australia's economy to become 100 per cent self-sufficient, even though new oil-fields are unlikely to be discovered here or in politically friendly parts of the world.
According to Archibald, the starting-point in implementing such a self-help policy is the fact that US$60-per-barrel of oil is the price at which coal-to-diesel plants offer attractive rates of return.
Australia, he said, was fortunate to have 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," he added, "is located where there is no need for power stations. The fate of all this low-grade coal is that it could to be put through coal-to-diesel plants, and the sooner we start along this path the better."
There are two ways of obtaining liquid fuels from coal: coal liquefaction and the Fischer-Tropsch process. The latter method, says Archibald, was adopted on a large scale by South Africa in response to apartheid-era trade sanctions.
Archibald, who has 25 years experience as a coal and oil geologist, says that with the Fischer-Tropsch process coal is burned in pure oxygen to create a synthesis gas that is catalysed by an iron or cobalt catalyst to long-chain liquid hydrocarbons.
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 70 per cent ash content and an operating cost of US$7 per barrel.
A urea plant proposed for Collie, 300 kms south of Perth, was similar in that it would use coal as a feedstock to produce synthesis gas, but a different catalyst for a different product.
He notes: "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. It has a production capacity of nine million barrels 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.
"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 north Perth Basin coals near Eneabba; the Collie Basin's coals, and billions of tonnes of lignite in deposits between Esperance and northeast of Kalgoorlie.
"The Kalgoorlie region alone consumes five million barrels of diesel annually, which equates to 14,000 barrels per 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 between in South Australia."
Archibald says the cost of coal-to-diesel capacity is AUD$274 per barrel.
He explains: "A car normally travels 20,000kms/annum, which, at 10kms/litre, would consume 2,000 litres. That's 12.6 barrels.
"The capital cost of providing that 12.6 barrels via a Fischer-Tropsch plant would be $3,452. If the car cost $25,000 that would be 14 per cent of the capital cost of that vehicle.
"Many people would be quite happy to pay 14 per cent extra for a car if it meant that it came with its own fuel supply. That is what it amounts to, and the coal-to-diesel plant is likely to last much longer than the car.
"All that's required is the right mechanism for the vehicle-using public to be able to make that investment."
Sasol intends building an 80,000 barrel/day plant in Indonesia and it will eventually boost this to a million barrels daily, about the level of Australia's liquid fuel requirement.
Says Archibald: "At that level, Sasol's Indonesian plant will be producing 20 times as much carbon dioxide as the Latrobe Valley power stations. Why should Australia deny itself liquid fuel supply security when our neighbours are going hell-for-leather?
"Another benefit of having such plants is that they can make up the shortfall from Australia's refineries. With the closure of South Australia's Port Stanvac refinery in 2003, Australia is only 75 per cent self-sufficient in refined product. Our refinery operators aren't going to increase capacity in the face of competition from more efficiently scaled refineries in Singapore.
"Coal-to-diesel plants dispersed around our coalfields will provide Australia with great protection against supply disruption - something that is urgently needed."Joseph Poprzeczny is a Perth-based historian and freelance writer.