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Old Trader is a 63 year old private investor, managing a retirement portfolio constructed to a) generate a high current yield, b) preserve capital, and c) increase capital. His methodology involves taking a "top down" macro view to identify favorable trends, and then engage in... More
  • Gasoline From Coal For Under $30/BBL 0 comments
    Mar 18, 2010 7:12 PM


    A press release from  the University of Texas at Arlington announced that researchers there have developed a process to convert lignite, a soft, and particularly form of coal into oil at a cost of $28.84/bbl. The breakthrough is not in turning coal into oil, a process that has been around since WW II, when Germany developed it to fuel its war machine, due to a lack of oil, but an abundance of coal, primarily in the Ruhr River valley. The same process was adopted and improved by Sasol of South Africa, and is still used today.

    The breakthrough is in the cost of conversion, which under current techniques is substantially higher. According to the university researchers, who spent some 18 months on the project, so far, the key was the development of what they call "micro-fluidic reactors". The US has approved the construction of a pilot plant to assess the technology.

    According to the Globe and Mail's article on the process:

    "Texas lignite sells for $18 a tonne. The coal conversion technology uses one tonne of coal to produce 1.5 barrels of crude oil. One barrel of crude produces 42 US gallons of gasoline. In other words, $18 worth of coal yields 63 gallons of gasoline: 0.28 cents a gallon"

    Rick Billo, the Dean of Engineering at UTA is quoted as saying:

    "We're improving the cost every day. We started off some time ago at an uneconomical cost of $17,000 a barrel. Toady, we're at ...$28.84 a barrel".


    Sources:
    Horn River News via Hedge Fund Network Group News @ LinkedIn
    The Globe And Mail
    Wikipedia

    If this process can live up to its promise, it has the potential to be a game-changer, as lignite is readily available globally, as the chart below shows.


    Lignite mined in millions of metric tons
    Country  ↓ 1970  ↓ 1980  ↓ 1990  ↓ 2000  ↓ 2001  ↓
     Germany 369.300 388.000 356.500 167.700 175.400
     Russia 127.000 141.000 137.300 86.400 83.200
     United States 5.400 42.300 82.600 83.500 80.500
     Australia 24.200 32.900 46.000 65.000 67.800
     Greece 8.100 23.200 51.700 63.300 67.000
     India 24 24 24 24 24
     Poland 32.800 36.900 67.600 61.300 59.500
     Turkey 4.400 15.000 43.800 63.000 57.200
     Czech Republic 67.000 87.000 71.000 50.100 50.700
     People's Republic of China 13.000 22.000 38.000 40.000 47.000
     SFR Yugoslavia 26.000 43.000 60.000 - -
     Serbia - - - 35.500 35.500
     Romania 14.100 27.100 33.500 17.900 29.800
     North Korea 5.700 10.000 10.000 26.000 26.500
    Total 804.000 1,028.000 1,214.000 877.400 894.800



    Disclosure: No positions
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