Phase transition fuel — a coal-to-liquid fuel project in South Australia
Exploration in the 1980s discovered a large sub-bituminous coaldeposit 800km north of Adelaide, South Australia. The company nowdeveloping this source is London, UK-headquartered Altona Resources, anAIM and Australian stock exchange listed company that is implementing adevelopment plan using a number of established technologies to convertcoal-to-liquid (CTL) fuels and provide gas for power generation.
The local geology of the Arckaringa basin which hosts the coalcomprises early-Permian aged coal horizons covered by 80m of sandstonesand 56m of the Bulldog Shale. On top of this is six metres of recentdeposits (blown sand and alluvium). What is more unusual is thethickness of the coal seams, individually up to 6.5m and accumulativelyto over 25-30m within a 40-50m vertical horizon. Structurally the coalsare found within a large syncline or basin that also provides the shapeand permeability to host a large aquifer, a welcome water resource inthe South Australian desert.
Although the licence areas held by Altona are crossed by the StuartHighway from Adelaide to Darwin and also the ‘Ghan’, the Adelaide-AliceSprings-Darwin railway, the nature of the coal, the market for powergeneration, and the cost of transport have in the past deterreddevelopment. Consequently the Arckaringa coals have been classified asa ‘stranded deposit’. But the US$100+ barrel oil price has transformedits potential.
According to Altona’s Managing Director, Chris Schrape, the economicsof the project have been enhanced by the conversion of the coal viagasification into liquid hydrocarbons for use in vehicles and jetengines. Furthermore, the location, although remote, will have directpower and transport links to move fuels and electricity to theunder-supplied market of South Australia, and liquid fuels to theNorthern Territory deep-water port of Darwin. It also has direct accessto the rapidly-growing southeast Asian markets.
Schrape maintains that the three Altona licence areas contain aresource of over 7,800Mt and, as such, ‘represent one of the world’slargest undeveloped energy banks’. Within the Wintinna (EL 3361)licence Altona has proved a Joint Ore Reserves Committee (JORC)compliant reserve of 700Mt (see table below left for reservecharacteristics).
The overburden above and sediments between the coal seams at Wintinnacontain significant sub-artesian groundwater flows that must be pumpedand diverted before mining can occur, and can potentially supply waterin an otherwise arid part of the world. As Schrape comments, ‘the coalsare sitting in a bath of water’.
As a separate issue, the high moisture content of the coal provides allthe process water needed for conversion of the coal into gas andeventually liquid fuels. The mining plan is an initial 150m-deep boxcut, followed by a ‘steady state’ conventional open cut and back filloperation. In the ‘base case’ evaluation, mining will be at a rate of10Mt per year to provide 10m barrels containing 80% distillate and 20%naptha. Some 560MW of export power will also be available.
The price and demand for oil products such as diesel and aviationkerosene is high, and, given the demand in developing nations, likelyto remain so. Furthermore the prospect of near peak oil production isturning attention to other sources of high-value fuels, or the rawmaterials to produce them. One of these is coal – particularly thosewith the most volatiles.
The use of coal (senso lato) to produce liquid hydrocarbons wasdeveloped in Germany, and is named after its two inventors, FranzFischer and Hans Tropsch. In the 1920s they discovered a method ofproducing liquid oils from natural or generated gas. During World WarII, synthetic fuels made from German coal via the Fischer and Tropsch(FT) process were responsible for up to 6.5Mt per year of liquid fuelfor the war effort.
In the 1970s Sasol in South Africa refined the process to supplypetroleum and transport oils, overcoming international sanctions thatwere triggered by the policies of the pro-apartheid government.
Today, the stimulus is economic and Altona Resources has completed apre-feasibility study for the Australian mine, its process technologyand markets for the final products. The study indicates that the entireproject can be built in a series of modules and that these offerscalability, a desirable function as capital investment is high.
Bit by bit
Mining will be by conventional truck and shovel. There is scope forreducing the cost of operation by using some liquid fuels from the FTprocess in the fleet, or by choosing an electric mine fleet powered byonsite power generation. The first module requires five million tonnesper year of mining capacity, the second will increase this to 10Mt/yand the third by a further five million tonnes per year.
The CLT process is well established and Altona Resources has engagedengineering companies that are experienced in the technology. The firstpart involves the gasification of coal using a retort. This heats thecoal in a controlled atmosphere using an injection of oxygen. At>700ºC, volatile components are driven off, forming a synthetic gasstream of carbon monoxide and hydrogen-containing impurities, leavingan inert slag residue. Part of this stream is injected with lowpressure steam and transferred to a combined cycle power plant. Theremainder of the gas is passed through a syngas conditioning unit toabsorb, separate and remove sulphur from the coal gas and the carbondioxide generated in gasification. Sulphur has a ready market insulphuric acid, used in mineral processing and the chemical industry.Its removal at this stage also obviates the need for flue-gasdesulphurisation in power generation.
The FT process converts the carbon monoxide and hydrogen syngas intoliquid hydrocarbons using a cobalt or iron catalyst. The process isendothermic, requiring energy usually supplied by partial combustionwith oxygen. In the case of coal-derived syngas, hydrogen is suppliedby water. The direct products from the planned plant are high-qualitydiesel and some aviation fuels.
Project economics are based on the production of diesel and othertransport fuels with a value at today’s prices of US$100 per barrel (42US gallons, 159 litres), equivalent to US$85 per barrel for crude oil.
Power generation from both coal gasification and tail gas from the FTprocess will allow power generation through a combined cycle plant,with 560MW available for export on the back of liquid fuels productionof 10m barrels per year. This power will go some way towards theprojected power shortage of 500MW that is forecast for South Australiaby 2016, a value that does not include the expansion of the Olympic Damthat may add another 500MW to demand.
With a conservative value of US$30MWh placed on the power, itscontribution to revenues will bring down the cost of producing liquidfuel to US$35 per barrel (operating and capital costs) or US$20 perbarrel (operating costs alone).
Of special consideration to Altona Resources is the aquifer, from whichgroundwater inflow to the mining operation will be in the region of100m litres per day. Although the project will consume water, all ofthis will come from the high moisture content of the coal, andconsequently the mine inflow will be returned to the aquifer.Sophisticated management to protect spring flows and reduce evaporativeloss during mining will be used. Furthermore, gasification and powergeneration provide clean water (through condensing of steam).
Schrape and his consultants are well underway with the development ofcarbon dioxide sequestration technology. ‘We have identified ageo-sequestration site some 100km away in the East Officer Basin and weplan to return CO2 to the earth. With Government support we areinvestigating clean coal technology.’
Quality parameter Wintinna run of mine coal
Total moisture % 38.0
Ash % 10.9
Volatile matter % 22.0
Fixed carbon % 29.1
Sulphur % 0.98
Energy GJ/tonne 16.2
Show me the money
Project economics look good based on a Royal Bank of Scotland, UK,financial model. Capital costs for phase one and two are estimated atUS$3.2bln (US$2.7bln for CTL and power, and US$500m for mine andinfrastructure) resulting in the annual production of 10 millionbarrels of ultraclean diesel (as the sulphur and other impurities havebeen removed in the gasification and FT process). Power generation willadd another US$150m giving an annual revenue of US$1.15bln. Demandwithin Australia and the Pacific region is high for both electricityand liquid hydrocarbons. There is much interest in the project,illustrated by Tongjiang International Energy Co Ltd’s Director,Michael Zheng Qiang, signing of an agreement to raise US$23 million tofund the on-going feasibility studies.