 Coal is not a perfect fuel, but so is
the “black gold” or crude
that oil consumers worldwide are currently
hooked into.
Trite as it may seem, but the “dirtiest
fuel tag” on coal lingers to this
day. Yet note that, paradoxically, utilizing
it to sustain a country’s energy
needs thrives inescapably as it remains
the most abundant fossil fuel on a global
scale.
Talking of long-term prospects, the
line of arguments evidently will not
just be confined on which fuel could
provide sustainability of supply; but
will also bring into spotlight the role
of coal in the so-called “clean
energy future”, primarily in policy
statements tussling various players into
the “renewables versus fossil fuel
debate.”
Petroleum, on the same token, is notoriously
labeled as harmful to the environment,
from its dirty exhaust to the toxic mess
it leaves when spilled.
So what choices are available in our
hands?
Pulling off a low-emission economy
Renewable sources of energy, no doubt,
have a pivotal role to play in achieving
a lower-emission economy; but by themselves,
they cannot do well to meet growing
energy demand. Unfortunately, the technology
is not currently available for renewables
to replace all, or even large part
of the country and the world’s
fossil fuel generation.
At current pace of global energy trends,
coal sensibly has a key spot in the present
energy mix of some economies, the Philippines
included.
By estimate of the World Energy Council
(WEC), global coal reserves hover at
roughly 984 billion tons (minus yet the
undiscovered exploitable resources),
which have equivalent energy value of
4.6 trillion barrels of oil; a far cry
from the calculated remaining oil reserve
of 1.7 trillion barrels; and for which
$16 trillion worth of investments should
still be pumped in between now and 2025
to ensure that oil supply winds up until
the next 40 years.
Locally, planners at the Department
of Energy(DOE) penciled in total coal
resource potential for the country at
2.37 billion metric tons. Production,
it was said, has been consistently maintained
at 1.1 million to 1.4 million metric
tons range; and peaking at 2.0 million
MT in 2003. The 2003 coal production
was able to displace about 6.55 million
barrels of fuel oil equivalent, which
translated into $176.82 million foreign
savings for the country based on a reference
price of $28 per barrel of oil.
Sounds like there is no sure-fire way
to make coal as a cleaner alternative
to other conventional and proposed alternative
fuels? Not really. With the advent of
clean coal technologies designed to capture
pollutants trapped in coal before the
impurities can escape into the atmosphere
and harm the environment, the ‘dirty
fuel’ hogwash could well be thrown
behind the times, experts say.
Ultra-clean fuels from coal
In dire search for alternative that can
both reduce pollution and help rip
up the country’s dependence on
oil imports, the DOE recently introduced
the idea of adopting a modern technology
that would produce liquid fuel products
using coal as a raw material.
The challenge, of course, would be for
the country’s energy managers to
find ways to produce safe, efficient
and effective fuel for the country’s
transport system and even for wider energy
needs, like in the power industry. By
and large, this shall be carried out
with the precept that these shall be
utilized in an environmentally friendly
way; and setting on one hand, the prime
concern of enhancing the country’s
level of energy self-sufficiency.
Through an integrated gasification combined
cycle (IGCC) technology, which is conscientiously
becoming a buzzword in next-generation
energy undertakings, US firm Headwaters
Technology Innovation, Inc., offers this
application for the more advanced stage
of production of the so-called synthetic
liquid fuels (such as gasoline, diesel,
jet fuel, liquefied petroleum gas and
petrochemical products) that shall be
extracted out from coal resource.
The coal-based oil products are technically
referred to as synthetic gases because
producing them involves a chemical process
called ‘gasification’; done
by heating coal with steam and the result
would be a mixture of carbon monoxide
and hydrogen – or gas. The atoms
making up coal are broken down into simpler
molecules – and the result would
be liquid fuels, as ultra-clean as they
can get.
The upside of this process, according
to Dr. Theo L. K. Lee, vice president
and chief technology officer of Hydrocarbon
Technologies, Inc., a subsidiary of Headwaters
for its China operations, is that by
turning coal into gas, the impurities
in coal– like sulfur, nitrogen
and other trace elements, can be almost
entirely filtered out in the conversion
process; thus, avoiding the phenomenon
where pollutants are spewed out into
the air, contrary to what normally occurs
in conventional method of coal combustion.
The hot combustion gases or the so-called ‘waste
heat’, tied to the over-all conversion
process, he further explained, can also
be used to spin a gas turbine to generate
electricity.
The scientific approach of converting
coal into syngases (synthetic gases)
has been a long-proven experiment that
was originally undertaken via the so-called
Fischer-Tropsch synthesis (to give credit
to its pioneers) for a coal-to-oil demonstration
plant in the 1940s; until such time that
evolution of technology came into fore.
Project proponents said the Fischer-Tropsch
method would also be initially adopted
in the proposed hybrid coal liquefaction
plant, to serve as the first phase of
the integrated coal-to-gasoline facility
in the country.
New frontiers
Given a judicious employment of this
technology - and perhaps, with a bit
of luck – the government is optimistic
that its foray into this alternative
fuel technology would come into fruition.
Energy Undersecretary Peter Anthony
A. Abaya, who should be credited for
tugging his way to bring in the planned
$2.2 billion investment for a coal-to-gasoline
facility by Headwaters, pointed out that
this venture brings great promise of
enabling the country of further reducing
its dependence on oil imports by utilizing “our
indigenous coal resource,” adding
that this will yield much-needed savings
to partly bail out the country from the
current financial crash it is currently
mired in.
Given that the estimated consumption
of the domestic oil market is at 350,000
barrels per day, Abaya noted the estimated
savings could reach up to $1.2 billion
annually; coming in as direct reduction
to the country’s oil import bill.
“Aside from dollar savings, we
can also count on cheaper prices of diesel
and gasoline produced out of coal as
a raw material over the long-term; if
compared to existing pump prices of products
coming from crude,” he added.
In contrast to the potential of other
alternative fuels, which could just be
positioned as a blend or additives to
conventional fuels, Abaya noted that
those extracted from coal are aligned
as replacement fuels.
“The only alternative fuels we
know of are coco-diesel and ethanol,
but these are blends, not replacements.
This one is same exact fuel, diesel,
gasoline, LPG, jet fuel and petrochemical
products, from a different resource,
not crude but coal,” he stressed.
Setting up a production facility with
50,000 to 70,000 barrels of capacity
per day is seen displacing roughly one-seventh
of the current level of the country’s
oil imports.
The Philippine project is being patterned
with the US firm’s $2.0 billion
venture in China with a partnership deal
with the Shenhua Group, also with 50,000
barrels per day capacity, due for commercial
operation in 2007.
The first phase calls for the establishment
of a 25-kilogram per day pilot plant
to serve as part of the experiment to
determine the feasibility of the use
of our indigenous coal.
Barring any hitches in project implementation,
can one really imagine a scenario, wherein
in 2009 when the coal-to-gasoline facility
is due to come on stream, the Philippines
would be able to take pride of an energy
output coming primarily from its normally “rejected” low-grade
coal transformed into a product with
very low sulfur content and a gasification
process that can run power facilities
where there’s no pollution, as
a result?
“That one would be a classic case
where it pays to be dirty,” Abaya
quipped; noting further that the “brown” or
lignite coal the Philippines known to
be rich of, has been initially found
to be the perfect type that could be
utilized to extract the liquid fuel products.
If government goals are realized, that
would certainly be a great story this
country can tell the whole world in post-Kyoto
Protocol environment. Hopefully, that
would come a moment soon.
Money makes the world go round, so they
say. Some people though argue that power
(or leadership) actually does the trick.
By implication, any price increase impinging
on budgets of ordinary consumers, especially
those surviving on measly incomes, would
just mirror a government’s failure
of affording the economic security its
people rightly deserves.
One need not necessarily state the obvious;
but at present, two of the most basic
commodities –oil and electricity – have
been triggering direct assault on the
pockets of the individual Filipino consumers
and threaten the economy to a slump.
As the public is being awakened to energy
issues and crisis concerns, with the
government unable to maneuver the situation
due to decimated budget to finance much-needed
infrastructure, the Arroyo administration
is being prodded to put its foot forward
in setting off at the policy table an
energy program that will truly and fairly
address the various concerns of stakeholders – primarily
the consumers’ bid for cost-competitive,
reliable and sustainable energy supply.
The current woes of the energy sector
are nothing new. In fact, we had already
been through two of the worst crisis
in our history – the oil shock
of the 70’s; and the power crisis
of the 1990’s typified by 10 to
12 hours of blackouts at its peak.
The key question is: have we learned
our lesson? Maybe, not? If we ever learn
from our mistakes and shield ourselves
from being shafted again, only time and
future circumstances can tell.
Re-thinking energy policy
Our experiences of the past crisis, should
have given us some time to move beyond
and rise above the situation, but we
have failed. Now, would it not be foolhardy
to wait until we are struck by another
round of crisis?
The country’s energy problems
actually layered up from various factors,
such as lack of planning on the part
of policymakers, embracing wrong yet
politically-palatable decisions and exacerbated
by external or world events encroaching
on supply and pricing fundamentals.
Policymakers are given another chance
to re-think the country’s energy
policy; and government planners are being
called upon to take cognizant of the
available and abundant resources in re-directing
the country’s energy future.
To that end, President Gloria Macapagal
Arroyo set out a policy statement directing
her energy officials to prioritize enhancing
the country’s energy self-sufficiency
to 60%, from the current 53%, before
she steps down from power in year 2010.
This way, the Chief Executive noted,
the money stays at home and will consequently
help reinvigorate the local economy.
The lists would be endless for the array
of exploitable indigenous and renewable
resources that will define the country’s
energy future. Of course, all it takes
would be grit and resolve in the exercise
of government’s power so it can
corner that much-needed money to re-energize
its flagging economy for the long-term.
Upsurge in fuel prices
The country’s dependence on foreign
oil was again laid bare when prices were
hitting drastic upswings in recent months,
with the cost of oil nudging over $50
per barrel at its peak in August last
year. New historic highs were again recorded
this month for the price of both unleaded
and diesel oil at over $58 per barrel,
as based on the Mean of Platts Singapore
(MOPS), which is the spot price reference
for the new players of the domestic oil
market who are dependent on finished
product imports.
Modern society loves cars; and this
fixation brings with it continued dependence
on oil being the most influential substance
in people’s daily lives. Market
experts said the current price upsurge
is just providing a taste of things yet
to come; as analysts are forecasting
that prices may stay at $35 to $40 per
barrel range for a longer period. Fingers
are being crossed that if ever, hopefully,
crisis proportions would not replicate
the period when the Organization of Petroleum
Exporting Countries (OPEC) grabbed the
oil-thirsty Western economies by the
throat leading prices to reach sky-high,
from a low of $2.30 per barrel in 1972
and soaring to $11.51 per barrel after
four years. The industry’s rancid
years stretched up to the 80’s
when the spot price of crude oil peaked
at roughly $40 per barrel.
History points out that being oil-import
dependent, a regime of high-priced oil
normally wipes out the country’s
economic gains.
So, how long can we actually get out
from dilemma of high oil prices? Apparently,
the government’s proposal to use
coal as an alternative raw material to
produce part of the country’s oil
requirements has yet to stand the test
of daylight. But, it might be worth the
experiment, especially with forecasts
that oil production worldwide would be
trailing downward in due time, thus,
exerting even more intense pressure on
prices.
“Under the current high oil price
and unstable supply scenario, coal-to-liquids
is a viable option for providing clean
transportation fuels,” said Dr.
Theo L.K. Lee, vice president and chief
technology officer of US firm Headwaters
Technology Innovation.
The negotiations for the project started
November 19 last year with Filipino firm
CPI Energies stirring the wheel to convince
the American investors to take a serious
look of sinking in capital for the venture.
After barely three months, a memorandum
of understanding (MOU) was signed in
Malacañang signaling the project’s
take off from the drawing board.
It was a challenging investment proposition,
related CPI Energies president Antonio
A. Ver, who traveled to New Jersey to
open the doors of negotiations for the
project, as he noted that this was the
period when reports were rife that the
country was about to be slapped with
a rating downgrade; which typically threatens
to dampen investor confidence.
“The project is now taking off,” he
stressed, adding that preparations are
getting headway for the required pre-feasibility
study. CPI Energy lends consultancy services
for the project’s implementation.
The parties are now targeting to move
at pre-feasibility and feasibility studies;
banking partly on the technical assistance
extended by the US Department of Energy
(US-DOE) for initiatives on tapping alternative
fuels.
“The US government remains committed
to the resolve of promoting alternative
fuels…and the Philippines is certainly
one of the considered niche market for
these initiatives,” enthused US
Ambassador Francis J. Ricciardone.
If the proposed facility would be proven
commercially viable, the aim would be
to move ahead on identifying the site
for the facility; set parameters on testing
procedures for the coal supply from the
Philippines that would be shipped to
the US for testing at Headwaters’ New
Jersey-based research and development
(R&D) facility; and will culminate
at firming up commercial agreement for
the project, prior to engineering design,
procurement and actual construction.
The Asian Development Bank, through its
private sector credit window, is expected
to participate in funding infusion.
The project blueprint also calls for
a larger market to be catered by the
coal-to-liquid facility; as it is being
positioned as “regional hub” for
Southeast Asia; given the country’s
strategic proximity to coal shipping
routes and coal sources.
Meanwhile, Lee explained that a two-phased
process -- direct and indirect coal liquefaction
--will be employed to produce the liquid
fuels.
“Coal/oil co-processing is a lower
cost and lower risk option for introducing
coal liquids,” he added.
Cost comparisons
Setting apart environmental concern,
as emissions of noxious substances
is expected to be taken cared of by
efficient clean coal technology application,
it was contended that the basic merit
of using coal is that remains a cheaper
option, be it in its utilization as
raw material for liquid fuels, such
as diesel and gasoline; or in running
turbines to generate electricity.
While the spot prices of steaming coal
have likewise been posting up trend since
2003; peaking at roughly $70 to $80 per
ton last year, it was explained that
the price movements, if quantified per
unit calorific value (at a reference
of 1,000 kcal), this would turn out very
small as compared to price increases
registered for oil and other fossil fuels.
Primary factors reported to have driven
up coal prices were increased demand,
primordially that of China; and a decline
in the additional export capacities of
some countries either due to lower production
triggered by coal mine accidents, lack
of infrastructure that has been causing
even demurrage (delays in coal loading
and shipments) and or restrictions on
export policies imposed by governments
of producing countries. Australia raised
the issue of foreign exchange concerns;
while Indonesia’s case of lower
exports can be traced to production cut-off
because of its inability to pursue near-term
development of new coalmines.
The situation was further complicated
by the failure of the United States to
assume its normal role as “swing
producer”, from which it was supposedly
increase coal supply to the market when
the coal prices climbed in order to contain
price rise. This was attributed to firm
domestic demand and the decline in its
export capacity because of price slump
that started in 1998.
With these as backdrop and the price
increases not expected to taper off soon,
government planners articulated that
it would be all the more that the development
of the country’s indigenous coal
resources would finally be given an aggressive
push.
For the planned 50,000 barrels per day
coal-to-gasoline facility, Energy undersecretary
Peter Anthony A. Abaya emphasized that
the price reference they are looking
at would be at $10 to $15 per metric
ton or an equivalent crude price of $26
per barrel. The coal feed is set at 12,800
tons per stream day for the proposed
plant size.
“Looking at current prices, there’s
already an apparent savings for the consumers,” he
stressed, noting that Headwaters could
come into market as a competitor to the
well-entrenched oil players, as it does
make economic sense creating a wider
base of competition in the deregulated
industry. It would be noted that Dubai
crude prices (used as benchmark by local
refiners) are currently hovering at $38
to $40 per barrel range; and coal prices
are still at a high of $40 to $50 per
ton.
In tandem with this, is a plan to construct
a 300-megawatt power plant to utilize
the steam that turns up from the liquefaction
process. About 100-MW will be allotted
for the facility’s use and the
other 200-MW is aligned to be sold to
the grid.
“So, aside from providing cheaper
alternative for transport fuel, the project
would also be of help in providing a
solution to the threatening power crisis,” Abaya
has emphasized.
Re-defining the
country’s fiscal
future
It is worthy to note that policy directions
currently being embraced by the government
always take into account the very urgent
need to clear up its fiscal mess.
Plugging the very big hole in the budget
is one of the toughest battle the Arroyo
administration has yet to win. It already
lined up proposed measures (with some
emerging very controversial) that may
help it finally balance the country’s
budget; and such agenda is also very
much intertwined in all of its economic
policies, those of the energy sector
included.
By the end of 2004, the fiscal deficit
was expected to top off at less than
P200 billion; which could account for
4.2-percent of the gross domestic product.
According to the National Economic and
Development Authority (NEDA), this will
cause the consolidated public sector
deficit (CPSD) to rise to 6.7 percent
of GDP; as compared to 5.6 percent in
2003.
The country’s socio-economic planning
body further noted that with the national
debt already at P3.459 trillion as of
last year, this will demand 76 percent
use of the GDP. But if the debts of the
technically-bankrupt National Power Corporation
(NPC) will be factored in, it said that
this will make the ratio of public debt
to GDP to about 135-percent.
Abaya clarified that when they were
inviting the Headwaters project, the
country’s fiscal problem has been
part of the equation; anchoring on foreign
exchange savings that could be generated
from the development of indigenous resource;
aside from the perceptible benefit of
security of supply and the eventual provision
of jobs and business opportunities once
the project has taken off from the drawing
board.
One of the crucial decision points to
date would be the identification of project
site – one that could offer sustainable
coal reserve to power the facility over
long years.
Semirara, which is currently the largest
coal-producing site in the country, has
always been a preferred site, but Abaya
disclosed they are open to options, depending
on what may come out at feasibility studies.
Still as price surge and energy shortages
are becoming more pronounced -- and as
their effects begin to ripple against
the nation – no one in the country
shall afford to be careless or take the
current situation for granted. And facing
such a critical situation, every bit
of conservation and value-creating endeavors
would help. In the final analysis, capital
must flow to where they are most needed
to avoid new round of energy crisis.
(With the permission of Myrna M. Velasco) |
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