Thursday, 6 December 2012

Synfuel to partly offset Peak Oil declines?

Chris Floudas, a professor of chemical engineering at Princeton, has just published a paper outlining a strategy for replacing the entire U.S. transportation oil supply with synthetic fuels from a feedstock comprised of a combination of non food crops and other (more abundant than oil) fossil fuels such as coal and natural gas. The fuel would be competitive at a $/barrel price of between $80-$110. Now, we’ve known for some time (at least the 1930s) that you can convert coal to liquids and natural gas to liquids so this is not new news. What’s different is the persistently high oil prices, which makes the process cost competitive with oil based fuels.

So let’s make a couple of assumptions here:

1. Oil prices stay high because markets are tight due to inability to raise production much
2. Using Prof Floudas’s numbers, 47 large plants would produce 71 percent of the total transportation fuel
3. Although US/Canadian oil production is increasing, globally we see a decline rate
4. We are meeting some (but not all) of the decline rate by a combination of increased fuel efficiency and substitution to electric vehicles.

So what does that look like?

For each percentage point of global decline rate, like for like, we need to replace 1% of the total U.S. fleet, which is 25 million vehicles. Now naturally, the fleet turns over once every 17 years so this gives us 100/17 for a percentage turnover every year which is about 6% of the fleet.

If every single one of those vehicles doubled fuel efficiency from 15 mpg to 30 mpg we could handle a 3% decline. That’s probably unrealistic, however, as Americans are notoriously conservative when it comes to changing their driving habits.
So how many are realistic?

Well right now we are selling about 50,000 priuses a year in the U.S. so let’s make a wild guess and say we sell 100,000 fuel efficient vehicles per year today.
Is it realistic to say in the face of peak oil we might see demand double? So let’s say 200,000 fuel efficient vehicles per year. That’s close to one percent.

So we therefore cover a half percentage point of decline rate with fuel efficient vehicles.

Let’s be super optimistic and say we can cover another half percent by replacing oil consumption all together by selling 100,000 all-electric vehicles per year. So we’ve got x-1 to cover with synthetic fuel (where x is the decline rate).

But let's imagine that we are uber-pessimists. Let's ignore the contribution to covering the decline rate from fuel efficient vehicles and electric vehicles (never mind compressed natural gas vehicles) and instead just look at how many plants we need to build and what it will cost us to do it.

So let’s be super pessimistic and say the decline rate is at the high end (say 10%).
So in the case of the U.S. that’s 1.3 million barrels needs to be replaced every year for transportation.

Using Prof Floudas’s numbers 71 percent of the total transportation requires 47 large plants, so that’s about 2/3 of a percent per plant each year.

So we need 15 large plants per year. That’s a cost of $226 billion per year.

Which is about 700 bucks per U.S. citizen per year or about 60 bucks per month or about 12 bucks per week.

So that’s the pessimistic case.

Now is that going to break the bank? Hmmmm.

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