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COAL-TO-LIQUIDS TECHNOLOGY AND ITS IMPORTANCE TO THE AIR FORCE AND CIVILIAN AVIATION Presented at the Western Business Roundtable Briefing on Coal-to-Liquids.

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Presentation on theme: "COAL-TO-LIQUIDS TECHNOLOGY AND ITS IMPORTANCE TO THE AIR FORCE AND CIVILIAN AVIATION Presented at the Western Business Roundtable Briefing on Coal-to-Liquids."— Presentation transcript:

1 COAL-TO-LIQUIDS TECHNOLOGY AND ITS IMPORTANCE TO THE AIR FORCE AND CIVILIAN AVIATION Presented at the Western Business Roundtable Briefing on Coal-to-Liquids Technology and Legislation S-115, U.S. Capitol February 27, 2007 Roger H. Bezdek. Ph.D., President Management Information Services, Inc.

2 THIS PRESENTATION Summarize U.S. energy dependence Assess implications of increasing energy imports Discuss key role of coal in enhancing U.S. energy security Describe coal-to-liquids (CTL) technology Identify CTL advantages over alternate fuels Estimate U.S. CTL potential Discuss DOD and USAF interest in CTL fuels Discuss U.S. commercial airlines’ interest in CTL fuels

3 U.S. ENERGY IMPORTS ARE INCREASING EIA forecasts that by 2030 U.S. will be importing 2/3 of its oil and nearly 25% of its natural gas Source: EIA, Annual Energy Outlook 2007, December 2006

4 SECURITY CONCERNS: U.S. IMPORTS CONTINUE TO INCREASE

5 Excessive dependence on imported oil from OPEC and others Potential of excessive dependence on imported natural gas World oil production may soon peak and begin to decline Record trade deficit ($764 billion in 2006) driven by energy prices Increased global competition from China, India, and others Supply disruptions by natural disasters or terrorism National security concerns SERIOUS RISKS TO U.S. OF INCREASING ENERGY IMPORTS

6 PRESIDENT BUSH: “REDUCE OIL IMPORT DEPENDENCE” First Thing to do: Stop Digging! Just to keep oil imports at current level will require an additional 5 MMbpd U.S. production of liquid fuels by 2025

7 COAL IS KEY TO U.S. ENERGY SECURITY AND INDEPENDENCE Eliminating U.S. oil imports by 2030 – Southern States Energy Board, 2006

8 Oil 5% Gas 10% Coal 85% Ultimately recoverable demonstrated reserves on Btu basis. Source: USGS, National Assessment of United States Oil and Gas Resources, U.S. Coal Reserves; Energy Information Administration Monthly Energy Review, August 2006 Table 7.2b, 2005 data. U.S. Fuel Resources Electricity Fuel Sources Coal Nuclear Gas Hydro Other 51.3% 20.1% 17.4% 6.7% 3.0% Percent of Electricity Generation COAL IS AMERICA’S MOST ABUNDANT FUEL 1.5% Oil

9 LIQUID FUELS FROM COAL U.S. Could Be the New Middle East 1.55 Trillion Barrels of Coal Synfuel Old Middle East Saudi Arabia:261.8 Billion Barrels Iraq:112.5 Billion Barrels UAE:97.8 Billion Barrels Kuwait:96.5 Billion Barrels Iran:89.7 Billion Barrels Qatar:15.2 Billion Barrels Oman:5.5 Billion Barrels Yemen:4.0 Billion Barrels Syria:2.5 Billion Barrels TOTAL 686 Billion Barrels Recoverable reserves 0.55 B Bbls Demonstrated reserve base 1.0 T Bbls U.S. Domestic Coal (oil equivalent) TOTAL 1.55 T Bbls Equivalent

10 COAL-TO-LIQUIDS TECHNOLOGY A Proven Technology Currently in Use World-Wide 10 3 UPGRADE The FT liquid product is upgraded to ultra high purity fuels 3 UPGRADE The FT liquid produced is upgraded into ultra clean synthetic fuels 2 FT CONVERSION Syngas passes through an FT catalyst and is converted to an ultra-clean liquid 2 FT CONVERSION Syngas passes through an FT catalyst and is converted into hydrocarbon liquid 1 GASIFICATION Coal is converted into syngas1 GASIFICATION Coal is converted into syngas

11 Natural Gas Coal Pet Coke Biomass Wastes Synthesis Gas Production Oxygen Plant Air O2O2 FT Liquid Synthesis Product Recovery Liquid Fuels Transportation Fuels Tail Gas Power Generation H2H2 Hydrogen Recovery Wax Hydrocracking Wax Hydrogen Separation Hydrogen Liquid Fuels An Option FISCHER-TROPSCH TECHNOLOGY CO H 2

12 ESTIMATES OF U.S. CTL POTENTIAL SSEB Study (July 2006): 5.6 MMBPD by 2030 USDOE/National Energy Technology Laboratory Study (July 2006): 5.1 MMBPD by 2027 U.S. National Coal Council Study (March 2006): 2.6 MMBPD by 2025 USDOE Unconventional Fuels Task Force (November 2006): 2.5 MMBPD by 2035 Bottom Line: All studies indicate huge potential for CTL in the USA

13 DOD ENERGY CONCERNS ground fuels, 15.1% marine fuels, 7.9% jet fuels, 73.5% Military Demand Approx 2% of US Consumption Approx: 300,000 bbl/ day of 20M bbl/day Total  Lack of secure & reliable sources of energy  Dependent on foreign oil  Becoming dependent on foreign refined fuels  Supply chain vulnerability  Reliance on mega-refineries  Vulnerable to terrorist threats and natural disasters  Need for cleaner fuels  DoD exempt from some EPA regulations  Need for Better Fuels  Thermal stability, advanced engines, fuel cells  Need for Fewer Fuels  9+ Fuels presently in use  Potential limits on deployments  Possible conflict with EU rules “DoD intends to catalyze the commercial industry to produce clean fuels for the military from secure domestic resources using environmentally sensitive processes to enable a bridge to the future.” Theodore K. Barna, Ph.D. Assistant Deputy Under Secretary of Defense/ Advanced Systems and Concepts

14 Fischer-Tropsch Fuels Hydrocarbon Rockets (RP-1 replacement) Hypersonic Vehicles (JP-7 replacement) Hydrocarbon reformers (fuel cell power generation) low emissions, high stability high stability, endotherm No sulfur, no aromatics High thermal stability, high H/C ISP= Btu/lb cooling 2.2X – 5X increase in cooling DOD GOAL: SINGLE BATTLESPACE FUEL FROM UNCONVENTIONAL RESOURCES No poisoning, less coking of reformer catalyst high cetane, >74 reduced exhaust pollutants Army and Marine Equipment Single Fuel for the Navy Ships (JP-5/F-76 replacement) Current and advanced gas turbine aircraft (Jet A/JP-8 replacement)

15 U.S. USG/DOD/AF FUEL UTILIZATION (USAF USES 57% OF USG FUEL) Gov’t Other Govt: 7.5% DoD: 92.5% Army: 9% Marines+other: 1% DoD AF: 57% ($2.84B, 2.8B gal) Navy: 33% AF Non Gov’t 98.1% Gov’t 1.9% % of 20.5M bbl/day US petroleum consumption (861M gal/day)[DOE] % of U.S. government petroleum consumption [DOE] % of DESC petroleum purchases FY04 ($4.96B). Includes nat gas + missile fuels, but they are ~2% of total. NOTE! FY04 JP- 8=$0.91/gal. FY06=$2.14/gal 4.4% Other 4.2% Trainers 30.1% Fighters 7.1% Bombers 54.2% Mobility: Tankers + Transports % of AF fuel consumed by aircraft type (FY98-04)

16 DOD ENERGY USE TOTAL SITE-DELIVERED ENERGY (BTU) 919 Trillion BTU Nation’s single largest energy user (1% of total U.S. energy use & 78% of Federal energy use) Application Installations Buildings 22% Vehicles 74% Industrial 3% Exempt 1% Commodity $10.9B Other 0.8% Coal 1.6% Steam 1% Auto Gas 0.7% Electricity 18% Fuel Oil 3% Natural Gas 8% Jet Fuel 71% Diesel2.3%

17 AIR FORCE ENERGY USE (COST) AF Energy Bill (Fuel) exceeds $10M per day Every $10/barrel increase drives up AF fuel costs $600M per year

18 ENERGY – THE USAF VIEW AF is, by far, Government’s Largest User of Fuel Energy is an Economic Security Issue –$5B/yr; 80% supports aviation operations –Costs have doubled since 9/11 Energy is a National Security Issue –Flying hours cuts hurt training and combat readiness –Assured, domestic sources of supply required –Resilient & reliable energy distribution capability needed Post-Katrina/Rita crude oil prices remain high –Worldwide oil market remains jittery –Gulf of Mexico shut-in production capacity constrained –Energy price forecasts to remain elevated through 2007 The Air Force’s energy problem is a subset of the Nation’s problem at large; the AF can demonstrate leadership While energy conservation can help, a more comprehensive Air Force energy strategy is required Develop “enough independence to have assured domestic supplies for aviation purposes “

19 USAF AVIATION FUEL COSTS & TRENDS Aviation Fuel Consumption in Gallons Fuel Cost (TY$) and Gallons Per Flying Hour Total aviation fuel costs (TY$) Aviation fuel consumption-rate increased 6% during last 10-yrs Fuel CPFH has increased 144% Some factors Fuel consumption jumped in support of GWOT Standard price of aviation fuel increased dramatically FY04 & FY05 AF is committed to reducing U.S. dependence on Middle Eastern oil by innovative practices and pursuit of latest technologies

20 AIR FORCE PROGRAM AF Goals: –Accelerate development and use of alternative fuels –Increase use of synfuels to 100 million gallons in the next two years –50% of fuel will be synfuels by 2016 Secretary of the Air Force request: Demonstration of F-T fuel in manned Air Force aircraft – accomplished in a B-52 Air Force Materiel Command (AFMC) is lead organization AFMC to define steps after demo Partner with industry to facilitate development of U.S. synfuel industry

21 USAF SYNTHETIC FUEL PROGRAM PLAN Continue to build consensus; signal intent to the industry Aviation Flight Demonstration Procure 100,000 gals Synfuel; distribute to TACOM, Pax River, WP-AFB, WR- ALC, OC-ALC & Edwards AFB Conduct basic materials compatibility testing at WPAFB, TACOM-Detroit, Naval Fuels Pax River; publish results Conduct diesel engine tests at TACOM- Detroit and SWRI Conduct Solid Oxide Fuel Cell tests at WR-ALC, GA, publish results Static ground engine runs at Tinker AFB, collect some science, publish results On wing ground engine runs at Edwards AFB, collect some science, publish results B-52 Flight Test, collect some science, publish results DESC (DLA) Request for Information (RFI) Seek industry response to a broad area questionnaire on the readiness/interest to invest in large scale, long term Synfuel production capability in support of long- term defense contracts Analyze results from RFI and other Studies

22 FISCHER-TROPSCH FUELS BENEFITS y Significantly Reduced Emissions Superior Low Temperature Properties Relative Total Deposition – ECAT (6 Hrs) Deposition, micrograms/cc Excellent Thermal Stability at High temperature JP-8 JP-7 S-5 S-8 SR-71

23 COMMERCIAL AIRLINES ARE ALSO CONCERNED ABOUT RISING FUEL PRICES Fuel has overtaken labor as the largest operating expense for most U.S. airlines Fuel now constitutes 25 – 30% of total airline operating costs – twice the historical average When the price per gallon of jet fuel increases by just one cent/gal., it costs the industry an additional $195 million in annual operating expenses American Airlines, which uses more oil annually than the country of Ireland, in 2005 paid $2.8 billion more for fuel costs than in Unlike other modes of transport, aircraft currently have no alternative source of energy

24 JET FUEL PRICES HAVE RISEN EVEN MORE RAPIDLY THAN CRUDE OIL Jet fuel costs have tripled in 4 years

25 U.S. AIRLINES CONCERNED ABOUT FUTURE FUEL AVAILABILITY Fuel requirements for civilian aviation are increasing rapidly, and by 2030 will account for half of total U.S. domestic oil production

26 CTL PROVIDES THE ANSWER Aircraft have highly specialized demands for fuel that exceed the requirements for most other petroleum products Synthetic fuel using CTL technology offers most promise as a alternative aviation fuel It can meet current specifications and no aircraft redesign is required CTL can provide a “drop-in” replacement for jet fuel Bio-fuels are not currently compatible with aircraft requirements Synthetic aviation fuels derived from coal are currently being used in some parts of the world

27 INDIVIDUAL AIRLINES ARE ENCOURAGING SYNFUEL DEVELOPMENT Air Transport Association of America & individual airlines are encouraging synfuel development David Neeleman, JetBlue founder and CEO Fred Smith, Federal Express founder and CEO Richard Branson, Virgin Airlines founder and CEO ATA Commercial Aviation Alternative Fuels Initiative begun in October 2006 to assess alternative aviation fuels & address rising fuel prices & supply instability Coal-based “JP900” fuel could be used in commercial jetliners. Superior performance characteristics & could reduce U.S. requirements for petroleum-based aviation fuels by 75% Richard Branson, Virgin Airlines, advocates aviation bio-fuels South African Airways has been utilizing coal-derived aviation fuel for the past decade

28 SUMMARY (1) U.S. oil imports are increasing, and may exceed 2/3 by 2030 U.S. energy dependence causing economic, foreign policy, and national security problems Coal can and must play a key role in reducing U.S. energy imports and enhancing national security U.S. coal reserves are twice the oil equivalent of the entire Mideast CTL technology is well-proven and currently in use in other nations U.S. CTL potential is estimated to be up to 5 MMbpd within 23 years DOD and USAF have immense liquid fuel needs and need to rely on CTL fuel U.S. airlines are concerned about future price and availability of jet fuel and are interested in CTL fuels U.S. must develop a viable CTL industry

29 SUMMARY (2) U.S. Air Force is serious about using synthetic fuel blends (near term goal: 50% synfuels by 2016) –B-52 Flight Demo completed –Future demonstrations are being investigated –Potential 100M gal purchase in 2008/09 –Establish certification process Ongoing research into the development & use of fully synthetic fuel (far term) –Assess operability/durability impacts –Understand role of aromatics and materials –Maximizes benefits of synthetic jet fuel –Develop S&T tech base for Single Battlespace Fuel Work with industry to catalyze development of U.S. synfuel industry

30 SUMMARY (3) Fuel is now largest single cost for U.S. airlines Airlines concerned about future price, volatility, and availability of fuel Coal-based synfuels are only viable alternative & can meet current specifications Coal-based “JP900” fuel could reduce U.S. requirements for petroleum-based aviation fuels by 75% Individual airlines are pursuing synfuel initiatives and promoting federal legislation Air Transport Association has begun the Commercial Aviation Alternative Fuels Initiative

31 THANK YOU! ROGER H. BEZDEK, PH.D. PRESIDENT MANAGEMENT INFORMATION SERVICES, INC

32 LOCAL CONTACT INFORMATION While in Australia through July 6, Dr. Bezdek can be contacted via ASPO Australia Association for the Study of Peak Oil and Gas International Australia


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