[Gasification] report "American Energy Security"

[MMBTUPR at aol.com]

          to          Gasification List               from   Lewis L Smith

Congratulations on the report, “American Energy Security”, prepared for the 
Southern States Energy Board. 

Regardless of what one may think of the policy recommendations, it is mind 
boggling in its comprehensiveness. It also contains a great deal of useful 
information much of which even an experienced energy specialists might have 
difficulty in gathering.

My favorite items ----

Page xxix   --   You tell the truth about oil markets. They are certainly not 
“free” !

[When I worked in an independent refinery, the representatives of the big oil 
companies would always tell us that everything was a question of “supply and 
demand”, especially when they were trying to “stick it to us”.]

Page five --- “… little reason to expect that exploration success will 
dramatically improve in the future.” Right on !

Page six --- “… recently many credible analysts have become much more 
pessimistic … Even many of the optimistic forecasts suggest that world oil peaking 
will occur in less than 20 years.” Yes, indeed.

[My favorite date is 2010. However, given the gross deficiencies of industry 
statistics, any attempt to pick a specific year is a crapshoot. The best that 
we can say with a high probability is that peak oil will occur soon enough to 
cause the world a lot of grief. Considering that it takes as many as five 
years to bring a major “grass roots” renewable-energy project on line, we really 
only have 15 years, at the most.]

Page 11   ---   Figure I-2.   Annual discoveries of crude oil, past and 
projected. Makes the point of page five with stunning clarity.

Pages 53   ---   CO2.   “The goal is ambitious and will require a lot of 
things to go right.”

[It is refreshing to see such frankness in a report on a controversial 
subject.]

Page 58   ---   Biomass.   Figure III-21. Good chart of the possibilities. A 
paper of mine on the “Decentralized gasification of Napier grass” is 
available by direct request to 
<   mmbutpr at aol.com   > . Napier grass has similar agronomic and combustion 
properties to miscanthus, although the two are of different species.

Page 121   ---   “US dependence on oil imports imposes a huge economic 
penalty that is not reflected in the retail price of gasoline”. 

[A very effective way to put it. I have found to my regret that most people 
go glassy eyed or get angry when they hear the word “externalities”, the 
phrase “spillover effects” or such like. We have some right here in Puerto Rico.]

Page 126   ---   “… it is the legitimate function of government to act where 
a need exists and the private sector is either unwilling or unable to satisfy 
it.”   Amen. The question is not “Will ‘the market’ get around to solving 
the energy problem ?”, but “Will ‘the market’ get around to solving it, 
before the ayatollahs get to us ?”

Page 128   --- There have been over twelve oil-supply disruptions in the last 
have century. 

[Why should we continue to depend on the Oil Belt for a major part of our 
crude-oil supplies. This is a region which continually price-gouges the customers 
of its principal export and frequently loses its temper. Our past behavior 
has been masochistic, stupid or “all of the above”. It also reflects the power 
of the auto manufacturers and the oil companies over our lives.] 

General   --- In various places, the report suggests the location of 
activities next to each other so for example, one could supply process heat to 
another. Good ideas. Haven’t seen this before.

Following are some other comments ---

Page xvii   --   “Voluntary” conservation measures wont “cut it”. America 
can no long afford the luxury of suburban housewives driving their kids to 
school in SUV’s. It is time to stand up to the auto industry, and raise minimum 
gasoline mileage requirements substantially. The technology is there. The will 
to use it is not. One guess why !

Page 16 --- Oil reserves. Table II-3. These are the worst figures in the 
industry full of bad numbers, for three major reasons --- [1]     Bald face lies. 
[2] Differences in definitions.   [3]   They do not include the crude-oil 
equivalent of the energy required to put a marketable product in a tank on the 
surface. In the case of oil sands or old reservoirs requiring a high rate of 
water injection, this can amount to 30% to 45% of the gross reserves. So the 
reserves of Canada, Kuwait and Saudi Arabia, to name a few, are grossly overstated.

Page 19   ---   Oil prices. Table II-6. Given the number of factors which are 
indeterminate with regard to the future supply and demand for crude oil, a 
table like this has only anecdotal value, despite the “expertise” of its 
sources. For example, does any one know how many passenger vehicles China will have 
in five years, what the average miles driven will be and what the average 
miles per gallon will be ?   Does anyone know how much diesel will be produced 
from each of the many existing and potential feed stocks, ten years out ?   

For short-term planning, I would take as “a floor”, the Iranian budget price 
of $46 plus $1.50 for cif to the Gulf of Mexico and as a “ceiling”, the 
highest potential price currently projected by a reliable analyst.

Pages 36+ and 84+   ----   Oil shale. The report notes that no technology has 
been proven beyond the pilot scale, yet it counts on shale to make a major 
contribution to replacing crude oil. As you all know, scale up in energy and in 
chemical process industries is unusually difficult to forecast and execute. We 
need a more detailed examination of the technologies, before making such “a 
leap of faith”.

Pages   43+   ---   CO2 for enhanced oil recovery. Growth of supply is 
plagued by price volatility in both CO2 and crude oil, However, once the customer 
has decided to use CO2 for enhanced oil recovery, the customer is more or less “
hooked”. Why not a Federal program to guarantee a minimum spread between the 
two prices for a fixed number of years ?   That way we might “sign up” enough 
customers to create an adequate pipeline network in the major US oil fields.

Pages 70+ ---   The report gives a lot of info about the company Sasol and 
the process basic Fischer-Tropsch gas-to-liquids, but does not mention the other 
GTL processes, such as Exxon’s or Shell’s, nor the huge GTL plant which 
Shell is building in Qatar. What gives here ?   By the way, there are currently 
deployment problems in this industry, so I doubt that a rapid short-term 
increase of capacity is “in the card”,

[I have no connection with any GTL process.]

General --- The implicit message in the report is that most of its 
recommendations should be implemented tomorrow morning at 8 am and carried straight on 
until 2030. However, consider the present crisis, the indeterminacies relating 
to crude-oil supply and demand and the uncertainties with regard to the scale 
ups and technological breakthroughs required for implementing the report’s 
program. The foregoing suggest a two-part approach. 

First the West should announce an objective of zero crude-oil imports. Second 
it should take immediate measures to reduce world consumption off crude oil 
and natural-gas liquids by five percent. The centerpiece would be an immediate 
effort of all civilian public-sector activities to replace petroleum fuels as 
soon as possible, regardless of cost, except in extreme cases. This would 
instantly create a huge and competitive market for renewables. It would also “take 
the wind out of the sails” of a lot of the more obstreperous individuals in 
the Oil Belt, and buy us some time, in case implementation of the program 
turned out to be more difficult than expected.

Needless to say, time is the most important variable in “the energy equation”
.

Cordially. End of message.