Interest in coal to liquids (CtL) is increasing rapidly for two principal reasons. First, the uncertainties associated with the supply of oil, both in terms of security and price. Demand is rising rapidly, particularly because of economic development in China and India while the potential reserves have increased only marginally. The overall reserves to production ratio indicates that there is approximately forty years of supply at current rates of usage. Second, two major oil importers, China and the USA, have very large reserves of mineable coal – as has India. All may well want to develop CtL technologies for strategic reasons. Some smaller oil importers also have coal reserves which might be used if the technology becomes well established.

The technology has been demonstrated on a substantial scale, but in the past, only in the situation of what might be described as a ‘siege economy’. It was used in Germany during the early 1940s when the country had limited access to oil supplies, and in South Africa when there were international sanctions on oil supplies to the apartheid regime of the 1970s and 80s.

Principal process routes for the production of coal to liquids

The price of oil has been volatile, but in broad terms has risen from an average level of 30–35 US$/bbl to more than 70 US$/bbl during the past five years and has peaked recently at more than 100 US$/bbl. This has given rise to fears about the longer-term overall price of oil, its availability, and the economic effects of price increases. At the price levels now prevailing, several other routes leading to the production of transport fuels can be considered, of which CtL is potentially important in a number of countries. All the routes, however, have limitations and environmental challenges, and would involve considerable costs.

It is highly desirable that the transport fuels produced by other methods should be readily usable in the existing fleet of vehicles. The properties of the existing blended transport fuels are described, since substitutes derived from coal need to match these properties so that they can be used in vehicle engines. Alternatively new engine designs would need to be developed, as would be the case if methanol or dimethyl ether were used. These fuels might be used first in captive fleets in large cities in buses, municipal vehicles and possibly in taxis since there are very substantial capital expenditures involved in providing a distribution infrastructure for alternative fuels.

The only major CtL production facility is that of Sasol in South Africa. The investment was made with government support in the 1970s and 80s, under relatively relaxed environmental requirements and standards which would not be acceptable in the 21st century. However, several commercial-scale demonstration units are at an advanced stage of planning in China and the USA although most are at the feasibility study stage. There has been extensive development work in Japan as part of an effort to stabilise the cost and security of energy supplies in their area, and there have been technical advances in South Africa in the use of Fischer-Tropsch synthesis. There are studies under way for possible CtL plants in a range of countries, including Australia, Botswana, Germany, India, Indonesia, Mongolia, New Zealand and the Philippines. Several are due to be commissioned during the period 2008-12, and the first demonstration plant using direct liquefaction is at an advanced stage of construction in China with a planned capacity of 1 Mt/y of liquid products. Commissioning is scheduled in 2008.

This report by Gordon Couch identifies several important constraints to large-scale development. For example, the USA consumes about 13 Mbbl/d of transport fuels. It is estimated that to replace just 10% of this would require over US$70 billion in capital investment. It would also require about 250 Mt/y of additional coal production representing a 25% increase, which would come with its own set of challenges. In China too there may be resource constraints. Coal production has increased from 1 Gt/y in 2000 to nearly 2.5 Gt/y in 2007. Given the proved recoverable reserve figure of 115 Gt, this means that the R/P ratio has dropped from 115 to just 46 years. If a substantial CtL programme used another 0.5 Gt/y then the R/P ratio would drop to 36 years, and unless exploration reveals currently unknown reserves, coal would be regarded as an increasingly scarce resource in only a few years time.

However, in China, there are some key factors which are driving CtL development. Coal production costs are relatively low, only about 50% of those in other countries, and coal costs are typically around US$12.5 at the pithead. The capital costs of a given CtL plant could be anywhere from 60% to 90% of those in the USA or Europe. Labour costs are only some 20–40% of those elsewhere. Perhaps the largest factor is strong support from central government.

Because of the high costs involved, and the environmental implications, CtL processes will only be used in the long term where there is substantial government support for strategic reasons, and also where the extra CO2 produced can be effectively sequestered. The environmental benefits arising from the production of cleaner fuels are significant, but governments are unlikely to require their use. The view expressed by the IEA in World energy outlook 2006 is that CtL production is likely to remain a niche activity during the period up to 2030, and the review carried out in this study confirms this.

Coal to liquids
Gordon Couch
CCC/132, ISBN 978-92-9029-451-1, March 2008
£255 non-member countries
£85 member countries
£42.50 educational price