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China Coal Paradox?

25 May 2005

Headlines from the same day:

From the first:

Optimists say China could be making as much as 1.2 million barrels per day (bpd) of liquid fuel from coal in 10 years, equivalent to more than a sixth of current demand, as high prices and a growing import reliance renew interest in the process.

Pessimists say uncertainty over the price of oil—or that of coal, which has also surged—will impede development.

And from the second:

China now produces about 1.67 billion tons of coal a year, the state-run newspaper China Daily quoted Wang Xianzheng, a vice director of the State Administration of Work Safety, as saying.

By 2010, output is expected to rise to 1.87 billion tons a year, far below the projected level of consumption, he said.

“The present size and scale of China’s coal industry are far from being able to meet the country’s future market demand. Insufficient supply will continue to be a major problem,” Wang was quoted as telling an energy conference in Beijing.

The likely outcome is that both statements will be true. If peak oil production occurs, as seems likely, sometime during the next few years, then nations endowed with rich coal resources will turn to variants of the basic Fischer-Tropsch process to generate synthetic fuels to fill part of the resulting fuels gap.

But given the increased demand pressures on coal not only for synthetic fuels, but also for electricity generation (a major problem for China), the second statement is likely true as well. There just won’t be enough coal produced to go around.

Coalreserves

The US is in a similar situation. Congressman Roscoe Bartlett used the EIA chart to the right to point out the same issue in his series of presentations on peak oil to the House.

Once one starts to factor in some ongoing economic growth, the reserve life of coal begins to drop dramatically from the multiple hundred year figure often bandied about. Once one factors in the conversion of coal to fuels (the lower bars in the graph) the lifespan decreases dramatically. (The graph is from the Energy Information Administration’s Annual Energy review 1999).

May 25, 2005 in China, Coal-to-Liquids (CTL) | Permalink | Comments (9) | TrackBack (0)

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Excellent analysis, Mike.

I think this indirectly highlights one of the second-order issues that isn't getting enough attention: The need for the industrialized world, especially the US, to strengthen its electricity grid and expand generation capacity ASAP. Right now, almost all transportation is fueled by oil, but it won't be long before that load begins shifting to electricity, in the form of plug-in hybrids and all-electric cars and scooters.

In fact, I think this is why Bush and the DOE are so eager to restart the nuclear industry. For all its serious drawbacks it's still a well understood way to produce a lot of electricity without the mercury or CO2 pollution.

In my mind, the key transition is when a large percentage of autos in the US are plug-in hybrids and can therefore pull from gasoline or electricity supplies.

This will reduce the friction in the electrical -to- gasoline -to- electrical marketplace. People will "fill up" their car with whatever energy is cheaper at the time.

Then, the US can easily justify increasing electricity production to reduce foreign oil consumption. The down side: too many senators are interestd in coal power (OH, TN, VA, NC, PA, etc) or natural gas power (AK, LA, TX, FL, etc). But, renewable electrical power generally has a lower marginal cost than coal or gas, and so once we can get more of those guys built, they'll work to provide green-e and keep energy prices low simultaneously.

Potential COAL deposits in MOngolia are enormous---Check out recent reports from IVANHOE mines---IVN---IVN.TO----robert friedland says IVANHOE in deal with MITSUI to develop mining plans---see UBS securities recent report---also recent BMO report on IVANHOE. Best, dave

I wonder how much oil is used to extract coal (digging, trucks, railways etc)? I would think that the price of coal will rise as the oil prices go up.

The real story here is that China has internal price controls for all its energy markets, so I understand; the resulting problems of shortage naturally occur when price controls create scarcity through subsidy.

Ah, another reference to the discredited "peak oil" theories. I suppose it's possible that humans will suddenly become stupid (there is ample evidence for that right here on this web page). But, more likely, China will figure out how to develop its coal resources, natural gas resources will be developed, humans will figure out how to manufacture oil from waste or tar sands or heavy oil (google "thermal conversion process"), etc.

"Ah, another reference to the discredited "peak oil" theories."

Discredited by whom? Certainly not Exxon-Mobil, who in their most recent report stated their belief that non-OPEC peak oil will occur in 5 years. I trust them a lot more than I trust just abut anyone else. If we have just five years until we're at the mercy of OPEC completely, isn't that nearly as bad?

"I suppose it's possible that humans will suddenly become stupid (there is ample evidence for that right here on this web page)."

Humans are stupid: we are shortsighted and focused on the here and now, and we have repeatedly failed to heed warning signs of impending collapse. Read Jared Diamond's book "Collapse." We haven't suddenly gotten smarter. We now have more tools, but we also now have more challenges than past civilizations.

how can i make liquid petroleum from coal

"Ah, another reference to the discredited "peak oil" theories."
As opposed to the solid, scientific "humans will figure it out..." theory?

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