OIL PRICES ARE INCREASING AGAIN.

HISTORICAL ANALYSIS

Below courtesy CleanCoal.com.au: Coal to Oil (Coal 2 Oil) Explained. The lack of stability in the Middle East and demand pressures from India and China has caused dramatic increases in the price of oil which has affected the global economy. However there are alternative resources that can be used for the production of oil – the main ones being black and brown coal.

It just so happens that Australia and particularly the Latrobe Valley and Gippsland Basin in Victoria have some 500+ years of low cost, low sulfur, high moisture Brown Coal that is ideal for (coal2oil) conversion to quality gasoline, aviation fuel and carbon fibers.

The history of "Coal 2 Oil" is not unlike the VHS v Beta phenomena whereby Beta had the best tape product but marketing and circumstances of the day lead VHS to dominate as the commercial product of choice.

In coal-to-oil (coal2oil) there are two main technologies – 1) Fischer-Tropsch (VHS) & 2) Bergius Hydrogenation (Beta) ECT’s unique de-watering ‘Coldry’ process is applicable to both (coal2oil) technologies; however we are proposing to pursue the 2nd and less popular (coal2oil) Hydrogenation process which has been developed by the Japanese after many years of testing using Brown Coal from the Latrobe Valley (1988-95).

Why are we choosing the less proven (coal2oil) process? The reported differences between the (coal2oil) processes show that Hydrogenation has a higher yield of petroleum per tonne of coal, lower cost and lower greenhouse output than its Fischer-Tropsch (coal2oil) counterpart.

Below is an outline of the general (coal2oil) processes and the different products produced: Fischer – Tropsch (coal2oil) Synthesis (as used by SASOL South Africa) Fischer – Tropsch Natural SynGas (GTL) Fischer – Tropsch BTL (Biomass to Liquid) Fischer – Tropsch CTL Coal to Liquid (coal2oil) Bergius Hydrogenation Process (Liquefaction "coal2oil" Japanese Style) Coal To  Liquids (CTL) (coal2oil) v Current Crude Oil Refineries CTL (coal2oil) Production Costs Latest News -

Japan Ready to Move on Coal Liquefaction (coal2oil) Fischer – Tropsch Synthesis. This (coal2oil) technology evolved in 1925 when Professor Franz Fischer, founding director of the Kaiser-Wilhelm Institute of Coal Research in Germany and his head of department, Dr Hans Tropsch, patented a (coal2oil) process to produce liquid hydrocarbons from carbon monoxide gas and hydrogen using metal catalysts.

The hydrocarbons synthesized in the process were made primarily of liquid alkenes (paraffin’s). Other by-products were olefins (basis of all poly plastics & fibers), alcohols, and solid paraffin’s (waxes). The required gas mixture of carbon monoxide and hydrogen - the so called synthesis gas - is created through a reaction of coke or coal with steam and oxygen, at temperatures over 900 degrees C.

In the past, town gas and gas for lamps were a carbon monoxide-hydrogen mixture, made by gasifying coke in gas works. In the 1970’s it was replaced with imported natural gas (methane).

Coal gasification (coal2oil) and Fischer-Tropsch (German coal2oil conversion process) hydrocarbon synthesis together bring about a two-stage sequence of reactions which allows the production (conversion of coal2oil) of liquid fuels like diesel and petrol out of solid combustible black coal. For indirect coal liquefaction (coal2oil), Fischer-Tropsch Synthesis can be used on all types of coal as well as other raw materials which contain coal.

Fischer-Tropsch (turning coal-to-oil) Synthesis took its first serious place in industry in 1935 at Celanese AG chemical company. By the beginning of the 1940s, some 600,000 tonnes of liquid hydrocarbons were produced per year in German facilities, made from coal using Fischer-Tropsch Synthesis.

Just prior to WW II Germany licensed the (coal2oil) process to four facilities in Japan, as well as a plant in France and in Manchuria.

After WW II, the destruction of most of the (coal2oil) production plants and competition from Middle East crude oil made petrol production from coal unprofitable.

The only new (coal2oil) production facilities built were in South Africa in 1950 in Sasolburg (hence the brand name SASOL). These (coal2oil) plants were government backed for political reasons (the apartheid era).

Currently, the two (coal2oil) plants operated by SASOL represent about 28 % of South Africa's diesel and petrol needs, processing some 45 million tonnes of black coal per year. Fischer – Tropsch Natural SynGas (GTL) Syngas can also be created from natural gas and is less costly than making it from coal.

Since 1993, Shell in Malaysia (Bintulu) and PetroSA in South Africa (Mossel Bay) have been operating industrial (coal2oil) Fischer-Tropsch Synthesis facilities, which produce liquid fuels from syngas (Gas To Liquid, GTL).

A third similar plant is being built by SASOL and Qatar Petroleum in Qatar in the Persian Gulf. In 2005, nine more GTL-facilities were being planned world-wide; most of them using Fischer-Tropsch Synthesis. Fischer – Tropsch BTL (Biomass to Liquid)

For a number of years German companies have been developing processes to create liquid fuels from biomass (Biomass to Liquid, BTL) the most notable among them being Future Energy GmbH which uses Fischer-Tropsch Synthesis. The syngas is produced from wood, straw, and other raw materials of plant origin. Fischer – Tropsch CTL (Coal to Liquid).

In 2006 (in 2009 many more coal2oil plants are being planned) the first US coal-to-diesel production facility is planned in Gilberton, Pennsylvania (ultracleanfuels.com). It will use indirect coal liquefaction (CTL), via coal gasification (coal2oil) and Fischer-Tropsch.

China, too, has been investing in CTL (coal2oil) technology using indirect Fischer-Tropsch Synthesis / black coal. Significantly in 2002 China began planning a commercial coal liquefaction (coal2oil) plant using the Japanese version of the Bergius /coal hydrogenation (coal2oil) process in Inner Mongolia with commissioning expected in 2008. Bergius Hydrogenation Process (Liquefaction Japanese Style)

The second method (direct coal liquefaction "coal2oil") was invented a few years before Fischer-Tropsch, in 1913 in Hanover by Friedrich Bergius. Coal hydrogenation (coal2oil), aka coal liquefaction (coal2oil), involves converting coal into an oil (like crude oil), that can be processed in refineries to make petrol.

The Bergius (coal2oil) process, however, works best with Brown Coal and "geologically young" black coal.

Coal To Liquids (CTL) (coal2oil) v Current Crude Oil Refineries Coal liquefaction by whichever route, is capital intensive and therefore benefits substantially from economies of scale.

Most studies on process economics have assumed that a full-scale commercial (coal2oil) plant would produce 50,000 - 100,000 bbl/day of liquid products. Such a (coal2oil) plant would process 15,000 - 35,000 tonnes/day of black coal or up to double that amount of brown coal.

The economics of coal2oil depend strongly on coal costs and this coal must be delivered to the (coal2oil) plant at a low price – this is the advantage of Victorian brown coals.

Since coal is more difficult to transport than oil, it would, as a general principle, be better for coal-to-oil (coal2oil) to be carried out in the country of origin and preferably close to the resource.

CTL (coal2oil) Production Costs The use of the Hydrogenation (coal2oil) process and low cost brown coal (USD $4/t) and ECT’s front end ‘Coldry’ drying / de-watering process is predicted to achieve a (coal2oil) production cost of around USD$25 - $30 per barrel (crude oil equivalent) which is a remarkable improvement over the last couple of decades costs.

Production costs for the Fischer-Tropsch (coal2oil) process using mainly black coal are purported to be around USD$40+/barrel.

Latest News - Japan Ready to Move on Coal Liquefaction (coal2oil) The following information comes from NEDOL Japan who did much of this work in the Latrobe Valley, Victoria. Announcement on June 12 in Tokyo advised: “Japan plans to provide Asian nations – particularly China – with the technology to liquefy coal (convert coal2oil) as part of a broader effort to reduce global dependence on crude oil.”

Through NEDOL they will join with Chinese (coal2oil conversion) companies (including Shenhua) “and plan to have a (coal2oil) plant operating by around 2010.” “Construction costs are estimated at 100b Yen (USD877m).” “Japan has also entered into (coal2oil) talks with the Indonesian government”… “Japan was also considering operating (coal2oil plants) in India and Mongolia.”