30 Plants Under Construction

According to a report by Credit Suisse, there are at least 30 large-scale CTL projects in the detailed planning, permitting, or feasibility stage. The Credit Suisse report notes that the expensive, capital-intensive CTL plants are generally considered financially viable when oil prices are above $35-40 a barrel, which is a safe bet in a world that is catching on to the concept of Peak Oil. Coal is China’s “real strategic (energy) reserve,” states the Credit Suisse report, because it can be obtained locally, although China is also a major coal importer.

China possesses, of course, vast coal reserves. China also possesses one of the world’s most extensive coal mining industries, although working the coal pits of China happens to be one of the most dangerous and lethal occupations in that ancient land. According to the Los Angeles Times, well over 5,000 people per year perish in Chinese coal mines, a mortality of over 100 deaths per week. But despite the lethality of the effort involved, the Chinese coal industry is experiencing skyrocketing demand amid generally rising oil and energy prices.

Raw Strategic Calculus

In the raw strategic calculus of planning and developing its future energy infrastructure, CTL makes great economic and political sense for China. China has abundant coal resources, but rapidly declining domestic oil reserves. With anticipated future growth in its energy demand, China will become ever more reliant on oil imports, which now account for about 40% of Chinese oil consumption. The Chinese economy currently consumes about 7 mbd of oil, which means that China is the world’s second largest user of oil after the U.S., which uses about 21 mbd of oil (over 60% of it imported).

One major oil supplier to China is Angola, which is now China’s largest single source of petroleum. (And by the process of elimination, Angola is thus a problematic future supplier of oil to the U.S.) Other oil suppliers to China include Saudi Arabia and Iran, which are, of course, places with attendant political risk, even to the Chinese. On the other hand, much of China’s imported coal comes from Australia and Canada, places well known for long-term political stability.

In addition to the operations and logistics of assuring their own energy supplies for the future, the Chinese are apparently well aware of the concept and implications of Peak Oil. For example, a number of computer servers located in and around Beijing are among the busiest sites on the planet when it comes to accessing Western Peak Oil sites on the Internet. The Chinese are downloading Peak Oil-related information as fast as it is published. (Hi, guys.) So both in terms of gathering knowledge and securing future energy sources, the Chinese are, characteristically, thinking long term.

World’s Largest Synthetic Fuels Program

Despite meriting only an article on Page 5 of the Financial Times (below the fold, as well), the Chinese adoption of a policy that supports methanol production via CTL is one of the most important stories in the energy-using world.

It is now official. China is embarking on the world’s largest synthetic fuels program. This has immediate implications for energy planners everywhere, for worldwide finance and capital expenditure, for the global coal markets, for the ecological footprint of Chinese development, for emissions of greenhouse gases, and so much more.

No, you did not read about China’s new national standard on the front page of The New York Times, or listen to Katie Couric breathlessly describe the details on the CBS Evening News. These journalistic worthies had other priorities, apparently. And things like future energy trends in China, let alone the future energy trends of mankind, are just not on their collective radar screen. But really, dear readers, this methanol gig is serious stuff.

Continued 12/4/06