JASUBHAI GROUP      ABOUT CHEMTECH     ADVISORY BOARD     AWARDS       EVENTS     PUBLICATIONS     CONTACTUS    
Chemical & Processing
EPC
Oil & Gas
Refining
Automation
Pharma Biotech
Shipping
Power
Water
Infrastructure & Design

An Irretrievable Slave
B K Bhaskararao, B Sudhakar
Oil is the most wanted substance forming part of basic needs. The present World consumption of oil is around 4500 MMTPA and if cost is no restraint probably it will surpass 6000MMT by 2020. Companies’ focus may shift from capital to operating expenditure - to generate revenue in the short term. It is clearly found that the future forecasts and projections are greatly affected by the present conditions of the market.

USA consumes 935 MMTPA oil of which motor spirit alone is 438 MMTPA (or approximately three times India consumes). In US there are 800 vehicles per 1000 people whereas in India or China there are about 50-60 vehicles. Thus the automobile industry (nearly 15 million vehicles sold in a year), one of the biggest thriving in the USA had taken back seat because of the abnormal rise in crude cost. The decline in the bbl price of crude from USD 147 to less than USD 50, likely to stagnate around USD 80-100 per barrel, may give a hard blow to many green power projects and nonconventional energy programmes. Petroleum experts predict Oil is the most wanted substance forming a part of basic needs.

As a supreme source of concentrated energy, its litheness in operations ranging from IC engines to boilers through kitchen fuel is most perceptible, and it is unrivaled feedstock for petrochemicals and the only source for lube oils. Thus a commercial commodity of incontestable, irreplaceable plays most significant part in a country’s economy most probably in its existence. This is evident from the present World consumption of oil around 4500 MMTPA and if cost is no restraint probably it will surpass 6000 MMT by 2020. Companies' focus may shift from capital to operating expenditure -- to generate revenue in the short term. For example, oil production enhancement through well servicing and zone change would be preferred to drilling another hi-tech cost intensive well. Acquisition prices are affected by market time of the deal or initiation of a project. It is clearly found that the future forecasts and projections are greatly affected by the present conditions of the market.

REVIEW OF ETHANOL BLENDING
Ethanol blending with gasoline may not be accepted even by a country where ethanol production is plenty, unless the price of oil hovers around USD 100/bbl. In anticipation of further rise, brain storming sessions were launched or are in progress in almost all countries and designs evolved, constructions started, required manpower was trained or hunted. Most of these projects are economically viable only if the price of the crude is above USD 100 a barrel. Many of the projects initiated were more related to production of ethanol at a cheap rate. A country like Brazil, which is the highest producer of alcohol, goes for gashol mix, as it was an importer of oil a decade ago. Now its oil and gas resources can make it an exporting country to all parts of America. In a country like India, 5 per cent ethanol blend would require more than 1 billion liters of alcohol, and this is very difficult to procure. In some countries even edible crops like corn / sugar / starch sources were given priority to produce more alcohol. Byproduct ethanol through sugar industry is more viable than any other source. Ethanol chemistry in 19th Century was only for chemicals production, but today it is a component for fuel mix.

BioDiesel: Advanced and groundwork on projects for conservation of oil and its products, and many energy related programmes were initiated. Price drop in crude may bring economic disarrays. As an example how Europen Biodiesel Board has reacted can be watched: European biodiesel production has been growing a swift clip. In 2005, the biodiesel production capacity among the so called EU-25 countries was 960 million gallons, by 2006 it had grown to 1,832 million gallons/ yr. This is the result of European Biofuels Directive (2003) concerning biofuels which aimed to replace: 5.75 per cent of the overall motor fuel (diesel and gasoline) by 2010, 10 per cent by 2020 (creating estimated biofuel demand of 11.4 billion gallons/ yr) 25 per cent by 2030, (creating estimated biofuel demand of 22.5 billion gallons/yr).

Corn in USA is now diverted for ethanol. 50 per cent of vegetable crops have been diverted to biodiesel. This fact is shown in FAO; UN Orgnisation under the umbrella of Brelton Woods has shown; first three months of 2008 showed record increase in food prices ( not happened in last fifty years) from 8 per cent in 2007 to 24 per cent in 2008. Oil companies haven’t figured out how to counteract this trend. Waste vegetable oil may be a viable way out.

United States is producing in excess of 2.9 billion US gallons of waste vegetable oil annually (equivalent to 1 per cent petroleum oils) mainly from industrial deep fryers in potato processing plants, snack food factories and fast food restaurants.

Exxon invested USD 600 million in partnership with Synthetic Genomics on algae conversion to oil, and it looks more investments are needed to go before commercialization which usually takes 20 years. Similarly Shell’s project to convert grass and other green material through enzymes portends the production of renewables without displacing food crops.

Shale Rock Projects : Oil shales are tiny sedimentary rocks containing relatively large to moderate quantities of young crudes (kerogens). To generate liquid oil synthetically from oil shale, the kerogen-rich rock is heated to as high as 950 0 F (500 degrees Celsius) in the absence of oxygen, a process known as retorting.

Shale can also be heated underground, known as in situ retorting or can be mined like coal and retorted on the surface. A tonne of rock can be squeezed up to yield 80 kg of hydrocarbons. Oil sands are another source of hydrocarbons. The sands or stones saturated with oil are very viscose and dense. These sands are processed to separate oil.

It can be processed in-situ or through open-pit mining. Directorate General of Hydrocarbons (DGH- India) with BRGM of France and Mineral Exploration Corporation Ltd of India launched program to commercialise oil shale production.

According to the RAND Corporation of the US, the cost of producing a barrel of oil at a surface retorting complex (upgrading plant, supporting utilities, and spent shale reclamation) in the US would range between USD 70–95 (USD 440/CubicMeter) (2005 value). Oil shale is distributed throughout the world unlike oil. Brazil, Estonia and China all have small commercial projects producing a total of 14,000 barrels of oil per day.

However, by far the world’s largest oil shale resource is located in the Green River formation of Colorado, Wyoming and Utah. Colorado contains the richest shale. Thus oil shale and sandstones sources put together can give rise to nearly a trillion barrels. Oil-sand production is going to be 4.8 MMBPD by 2035 from present 1.8 MMBPD.

Royal Dutch Shell had announced that its in situ oil shale extraction technology in Colorado could become competitive at prices over USD 30 per barrel (USD 190/m3), while other technologies at full-scale production assert profi tability at oil prices even lower than USD 20 per barrel.

A publication in the journal Pétrole Informations compared shale-based oil production unfavorably with the liquefaction of coal. The article portrayed coal liquefaction as less expensive, generating more oil, and creating fewer environmental impacts than extraction from oil shale. Perhaps they did not take account into mining and transportation, and grinding of coal plus the disposal costs and hydrogen requirement for the process. It cited a conversion ratio of 650 litres (170 US gal) of oil per one ton of coal, as against 150 litres (40 US gal,) per 1 tonne of shale. Naturally shale rock is not 70 per cent carbon. People forget gas and oil emit less CO2 than coal.

Tight Oil: Natural gas and oil don't exist underground in some giant caverns or traps waiting to be pumped to the surface but hydrocarbons are found trapped in the pores and cracks of a reservoir rock through geological ages. Sandstone has good pores and pore channels, hence holds hydrocarbons but not permeability so oil cannot flow. Oil has to be expelled by cracking the rock. This process is known as fracking. Conspicuously, some countries like France, Germany stopped shale fracking because of doubtful environmental impacts. The fear of environmentalists is more hyperbolic, energy cannot wait for tomorrow.

All the environmentalists cannot put together generate a barrel of oil. The fracturing of rock can be caused by various methods like hydraulics (high pressure water and sand mix with little bit detergents and rock softeners)/explosion/displacement. A decade back NG gas was sold at USD 10 per million BTU, because of plentiful Shale gas discoveries and recoveries the cost may drop to USD 3 per MMBTU. Estimates show that the amount of NG available is sufficient to satisfy the needs of North America for about a century and a half. Envisioning this EXXON and other companies launched capping the wells. Harold G Hamm bought the biggest US oil find Bakken formation equal to Alaska’s Prudhoe. N Dakota along with Montana and Canada sits on a vast basin of untapped oil amounting 24 billion bbls producing now 2.5 MMTPA.

Shale oil plays such as the Bakken have far more in common with shale gas plays like the Marcellus Shale of Appalachia and Haynesville Shale of Louisiana than they do with oil shale of Colorado. Enron the biggest producer of oil in N Dakota (360,000 BPD) through fracking in Marcellus shale of Ohio through Pennsylvania West Virginia. This field is possessing 13 MMMCM of NG. The gas easily converted to liquid form to facilitate easy storing and handling (GTL) as it is done in Qatar by Shell. It would be the future goal of many companies. Even gas cracking for petrochemical industry can be started.

Similarly Presalt Deepwater formations below the ocean bed (Brazil'ss East coast offshore drilling) preserve dincrediblylarge amounts of good oil available at cheap rates, perhaps below USD 60 barrel.

The effect of cut in oil production may or may not have any direct effect on the demand at least in initial Stages. The big establishments will have new technology or go for alternate systems. These may be similar to small turbines for power and utilisation of wind or bio energy including blends of alcohols and petroleum spirits. Thus the price increase due to reduction in oil production will lead to increase abundant employment opportunities. Now the Oil producers think of increasing the oil production because of the charm in price rise, hence the cupidity for the price again brings down the price due to competition in production and glut in industry. First direct result of increasing production is the storage and transportation costs. How much a consumer or a producer can store or can decide to store? The existing refinery activity partially restored or cut to match situations, but it is not going to leave any mark on other activities.

It is clearly found that the future forecasts and projections are greatly affected by the present conditions of the market, i.e., falling crude price and the global credit squeeze. This is poised to give a severe blow to upstream investments, especially in the new exploration frontiers like deep-water or ultra-deep-water discoveries. At the same time, the initiatives by these companies in non-conventional and alternative energy sources may be retarded or obliterated. Suddenly the risk factors for such new projects have multiplied.

In this state of affairs what are the options? First option is to follow Royal Dutch Shell. They put more money into developing nonconventional oil-resources like the vast reserves of oil sand in Canada. Shell, along with Suncor-Petro Canada, Imperial Oil and a half-a-dozen other companies are delaying new projects or cutting back on their spending in Canada. Some of these oil companies swear it’s more a concern over rising costs than the falling price of oil. The Canadian oil sands are a big money-maker when oil was at USD 145 a barrel.

It would be a profitable operation even with oil at USD 100. Thus the decreasing production of oil will open the gates of new ventures like using sand oils, shale oils, harvesting hydrates or even using coal tar hydro gasification followed by hydrofining of coal oils etc. Today refineries are interested to go for light crudes, but in the days to come the refineries should be equipped to process variet y crudes (specially heavy crudes) It is true that fall in price of crude is welcome but precipitous fall may be more dangerous for two reasons viz. Wanton consumption and Bounteous wastes, leading to improper utility of specially heavy fractions. When the crude is cheaper the consumer has options like Choosing gas or naphtha for fertilizers or for power houses; Utilisation of fuel oil / Increase in production; Green energy may not have much significance at USD 65 or USD 55 a bbl.

Municipal-Waste Management: City gas production, Biomass conversion to fuels, Land-fill gases, Biogasification, Coal bed methane, harvesting of gas hydrates are more significant because of the low cost raw materials. In addition to the profoundly organized Biodiesel projects where even corn or edible oils are converted into biodiesel because of underlying premium. Many fertile lands and forests have given way to biodiesel crops like Jatropha / pongamia / sunflowers, castors, palms etc. The energy and materials used in raising the crops and converting them through esterification by using methanol, another manufactured commodity would definitely pull up the cost in future. Recovery, proprietary chemical formulations to enhance oil production have been incessantly developed (Petroluxus effective friendly chemical to reduce the surface tension to stratify oil and gas from the sands and clays). Because of price shooting of barrel to USD 147 in July of 2008 various proposals in India have to go for green energy and cut down emissions were started. In this direction a planning has been kicked off to meet oil scarcity in different operations viz. Transport (All types ), Power generation, Chemicals & fertilisers.

Even in a country like Africa where oil and natural resources are plenty, the projects of generation of electricity from land fill gases are undertaken as a future necessity; the project based on Clean Development Mechanism (CDM) was initiated. National BioFuel policy of the Government of India is to increase the blend of bio-fuels to 20 per cent from the present 5 per cent by 2017. This gives scope for the production of alcohol and inedible oils. As such there is dire scarcity of edible oil hence the costs increase is expected. Can the non edible oils produced from the same land give equal remuneration to farmers in India or other places? Also firstly these plants rapidly devour the fertile ingredients of the soil, secondly the land that grows food crops is lost for ever. This would lead to total collapse of farming sector which is already under threat due to labour and /fertilizer costs and Real Estate boom and improper availability of resources. Further the projects undertaken by various ministries and NGOs will be jeopardized . Since the oil shock in 1970 when the crude price jumped to USD 10 from a mere USD 3 per barrel and for next 20 years the price increase was steady and normal ie. in 1999, the price of oil hovered around USD 16 a barrel, hence there was lull in development of non conventional energy resources. After reaching peak value of USD 147/bl in the months that followed as fears of a global recession grew, prices plunged to USD 75 a barrel, a roller coaster ride that left both producers and consumers confused. Prices were still far higher than they had been a few years earlier, but oil-producing countries had secondary thoughts of getting huge revenues altered their plans for a strong economy. UNDERGROUND COAL GASIFICATION (UCG)
This is a gasification process applied to non-mined coal seams, using injection and production wells drilled from the surface, which enables the coal to be converted in situ into gas. The process has produced commercial quantities of gas useful for chemical processes and power generation. The UCG process developed, refined and practiced by Ergo Exergy is called the Exergy UCG™ Technology or UCG™ Technology. It differs from generic UCG in its higher exergy efficiency - hence lower energy dissipation in to the environment.

During the UCG process, much as in conventional gasification methods, an oxidant reacts with coal of the underground coal seams, and part of released sensible heat is used in coal drying, pyrolysis and the endothermic reactions that reduce the combustion products. The resulting mixture is UCG gas. The gas composition depends on the coal geology as well as the process parameters. It can be produced using a variety of oxidants, including air and oxygen-rich gaseous blends. UCG technology uses a variety of modern drilling methods. Normally, UCG is applied to relatively deep coal in water-saturated conditions, although it is also possible to gasify unsaturated coal seams that lie above the water table.

UCG is an industrial technology that operates large-scale gas production facilities consisting of multiple modules or gasifiers. The World’s power demands are expected to rise 60 per cent by 2030, according IEA, and that the fossil fuels will account 85 per cent of energy market by 2030. Coal would continue to be used in all those 50,000 plants operating round the world. However, Natural gas/ shale gas may dominate, after all the non conventional energies contribute less than 1 per cent energy needs. Even the energy expert, Daniel Yergin is of the opinion that NG is no more a bridge fuel but permanent and as the partner in renewables providing power when the wind is not blowing and sun is not shining.