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STAFF REPORT N Although some private oil industry spokesmen say the figures published here a r e highly controversial, the Bureau of Mines reports substantial bases for its estimates of the . . .
Cost of Synthetic Fuels A P P R O X I M A T E L Y half of all the fuel energy used in the United States is now provided by oil and natural gas. A persistent and rapid growth in energy dem a n d during the last 3 d e c a d e s has been absorbed largely b y the liquid and gaseous rather than solid fuels. In 1 9 4 8 the energy provided b y coal w a s substantially t h e same as in 1920. M e a n w h i l e , t h e use of oil and natural gas each has increased fivefold. "On a per capita basis, the change is more significant. Coal consumption has dropped from about 6 tons per person to 4 1 /* tons, while oil has increased from 4V« barrels to 14V 3 , and natural gas from 7,500 cubic feet t o about 3 5 , 0 0 0 . "These facts w o u l d h a v e only academic interests if t h e U n i t e d States h a d unlimited supplies of all fuels. However, w h i l e the nation's reserves of coal are adequate to m e e t our n e e d s for centuries, those of oil and natural gas appear limited. It is obvious, therefore, that the security of our liquid fuel position would b e greatly e n h a n c e d if t h e supply could b e based in a n increasing degree on solid fuels, such as coal and oil shale, which make up more than 95f/c of our fuel reserves, instead of natural oil and gas. In addition, this w o u l d create n e w employment and h e l p to stabilize the market for coal, which m a y b e facing comparatively bleak prospects in the near future unless its position w i t h respect to other fuels is improved." This statement 'was m a d e b y Secretary of Interior C h a p m a n in his annual report o n the synthetic liquid fuels program w h i c h was recently presented t o Congress. Commercial production of liquid fuels from coal a n d oil shale is largely dependent on a d e q u a t e sources of raw materials and production at costs w h i c h allow competition with such other fuels as natural oil a n d gas. Work d o n e during t h e past year b y t h e Bureau of Mines and other cooperating government agencies as w e l l as private industry and educational institutions gives some indication as to the progress m a d e along these lines.
and a number of other resources and facilities. # T o determine t h e extent to which such combined requirements can be met, the Secretary of the Interior has requested the Army Corps of Engineers to m a k e a comprehensive survey of the United States and Alaska. T h e factors under consideration include the availability of raw materials, water, power, transportation, labor, housing, and markets, as well as the problem of national defense. Sample surveys were completed of portions of Colorado, Kentucky, Montana, and Texas t o develop techniques. T w o reports summarizing t h e results issued during 1949 have shown that there will b e no scarcity of raw materials or suitable locations for commercial plants. These preliminary surveys found available deposits of raw materials which on conversion would yield 1 5 6 billion barrels of liquid fuel. T h e s e areas could support plants producing u p t o 7 million barrels a d a y of gasoline and oil, o r about 20% more than our present consumption of all oils. T h e general survey is now under way in Alaska and the 3 9 states h a v i n g known deposits of raw materials suitable for synthetic fuel manufacture. Reports for many of these states will be issued in 1950.
Resources for Synthetic F u e l Production With respect to raw materials, Secretary Chapman states that although the United States has enormous deposits of coal and oil shale, suitable areas for synthetic fuel plants must furnish, in addition, water
Cost of Producing Synthetic Liquid F u e l s T h e technology for producing liquid and gaseous fuels from coal and oil shale was developed to a considerable degree in Europe and in some other foreign countries before World War II. It has b e e n extended so rapidly i n t h e United States both by the Government and industry since t h e end of the war that the question now is not—can liquid fuels b e made from solid fuels? but rather—what is t h e best w a y of doing the job? Based on technical operations to date, Bureau of Mines technologists have appraised progress in terms of product cost. In substance the estimates indicate that refined products can now b e produced from oil shale and coal at actual costs averaging 7.3 and 10.8 cents a gallon, respectively. If a profit of 6% on the average unamortized capital investment is added, plus 4 0 % income taxes, the wholesale price for producing at the plant w o u l d average 9 cents a gallon for those from oil shale and 14.5 cents for
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those from coal. This compares with a price range of 10 to 15 cents a gallon wholesale for comparable grades of motor gasoline. Bureau of Mines spokesmen point out ( 1 ) that these figures are not precise cost figures and ( 2 ) that no precise estimates will b e available until commercial synthetic fuel plants are actually in operation. T h e estimated costs, however, are based o n a considerable accumulation of data. Data o n shale oil are based on ( 1) operation o f an oil shale demonstration mine and retorting plant for approximately t w o years and ( 2 ) operation for several months of an oil shale refinery. T h e data o n oil from coal are based on successful initial runs of a coal hydrogenation plant. Estimates of operating costs of gas synthesis plant using coal will not be available until the demonstration plant, n o w being completed, has b e e n in operation for several months. Secretary Chapman points out that costs of producing synthetic fuels under European conditions have little or n o relation to costs in the United States. This is due to improved American technology which includes greater efficiency in mining operations, greatly improved technical equipment, and more effective techniques. As a basis for its estimates of capital investment and daily operating charges for oil shale plant operations, Bureau of Mines technologists h a v e taken t h e figures applicable to an oil shale plant capable of producing 10,000 barrels of crude shale
Table I. Daily Production of a 10,000Barrel-a-Day Shale Oil Plant Raw materials Oil shale, tons Crude shale oil, bhl. oducts, bbl. Tot fuel Diesel fuel Fuel oil Total fuel -products, tons Ammonia Coke
14,035 10,000 5,150 3,350 340 8,840 27 62.6
oil per day. Such a plant w o u l d use 14,035 tons daily of oil shale of the type found near Rifle, Colo. This shale yields about 30 gallons of shale oil per ton. From an area approximately one mile square, 102 million tons of shale can b e mined. This amount is sufficient to supply
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a 10,000-barrel plant for 20 years. The daily production of such a plant is set forth in Table I. It is to be noted that jet fuel constitutes •about 60'/r of the total product. About two thirds of the jet fuel is in the boiling range of gasoline, but the octane number of the gasoline fraction must be improved to meet motor fuel specifications. The octane number of the gasoline fraction can be improved and additional motor fuel can be produced from the Diesel fuel and the high boiling fraction of the jet fuel by modifying the refining process to increase the hydrogenation. Further work is necessary before reliable estimates can be made for gasoline costs. For cost calculations it is assumed that the terrain would he similar to the mountains near Rifle. A plant in this neighborhood would consists of three areas: the first and highest for crushing, the second for shale storage, and the third for retorting. The spent shale may be disposed of in nearby valleys. The crude oil would be piped to a refinery near the Colorado River or partially processed to reduce the viscosity and piped to a distant point for refining. The capital investment for a 10,000-barrel-a-day plant appears in Table II.
Table II. Capital Investment for 10,000Barrel-a-Day Shale Oil Plant Capital Section of Plant Invcsttm nt" Mining and crushing $ 4,200,000 Retorting 7,468,000 General facilities chaigeable to crude oil 2,280,000 Utilities chargeable to crude oil 1,989,000 Total for production 17,531,000 Operating capital ( 10% of plant items ) 1,594,000 Total for crude oil production 17,531,000 Refining 15,100,000 Pipe line ( 2 miles) 150,000 General facilities chargeable t o refining 3,435,000 Utilities chargeable to refining 2,997,000 Total—refining plant items "21,682,000 Operating capital ( 10'.£ of refin2,168,000 ing plant itt-im ) "23,850,000 Total for refining 41,381,000 Total capital investment ° Amounts for plant items include* interest at 3.5' € a yt-ar on invested capital durum the construction period. Capital is assumed to be expended 10'', in the first y» ar, 50'J in the set-otul year, and 40' '< in the third year.
Mining cost estimates were based on actual operations at Rifle. Estimated capital expenditures for mine development are $4,200,000 including $524,160 ( 1 2 ' ; ) for excavations; $1,577,700 (37'^) for installations; $1,716,500 (41'.; ) for mining equipment; and $381,640 ( 1 0 ^ ) for contingencies. All costs were computed at prices and wage rates prevailing in 1949. Equipment estimates were based on actual quotations for delivery. Excavation costs were determined from operations at the demonstration mine. Depreciation was calculated by assigning each item of capital investment an average service life, expressed in working shifts, ranging from 2,000 for light vehicles to 15,000 for 1188
Retorting costs are based on the Bureau of Mines gas flow process. It is noted that other retorting methods are being developed which may be more efficient, such as the one being developed by Union Oil Co. of California. Refining cost estimates are based on the common commercial operations of delayed coking of the crude shale oil followed by mild hydrogenations of the coker distillate over a catalyst. Removal of sulfur and nitrogen is no longer a serious problem, and the crude oil, when processed, gives a high yield of the more valuable products boiling under 725° F. Table IV presents a breakdown of the retorting and refining operations. For the retorting and refining operations, equipment costs were compiled from suppliers' quotations; from published data in the form of charts and curves; or from the size, weight, and material used. Freight and erection labor have been included in the installed costs. This price of 7.3 cents a gallon and Table III. Summary of Operating Costs figures for other products are costs and for Producing 14,035 Tons of Crushed Oil do not include return on investment. This Shale Daily return must be included to b e comparCost Ton able with the selling price of petroleum Mining products at the refinery. Assuming a 6r/r Direct supervision $0.0171 return a year on operating capital and the Drilling .0475 .0848 Blasting average unamortized part of the capital .0328 Loading .0658 investment, after income taxes of 40'Y Transportation .0155 Scaling (return after 40r/o income tax is 6rA of .0232 Electric distribution .0162 Miscellaneous $3,762,000 operating capital and 3% of Crushing and conveying $37,619,000 initial capital investment), Direct supervision . 0020 the required margin above cost is 70 cents Crushing .0322 Conveying .0089 a barrel. Adding this to the cost of $3.07 Overhead gives $3.77 a barrel, or approximately 9 .0461 Super., eng., management cents a gallon, as the necessary refinery .0339 Labor burden .1105 Depreciation realization. Taxes .0088 There is one further problem that must Insurance .0082 Subtotal 0.5535 be considered in connection with the establishment of a shale oil industry— Contingencies _ 0324 namely, the market for the product. The Total cost 0.5859 area around Rifle is sparsely populated
excavations and permanent structures. Calculations were made for operation of two shifts a day working a 7-day week. Maintenance costs were calculated at a percentage of the equipment costs prorated through the life of the equipment in shifts. The capital investment outlined amounts to $4,138 a barrel daily of crude shale oil or $4,681 a barrel daily of finished product. The Bureau of Mines figures do not include a capital investment for housing for the workers. It is assumed that with stable operations and reasonable promise of job security and adequate wages, this cost should be carried by the employees. * Mining costs (Table III) are based on the costs estimated by the Bureau of Mines in its operations including trucking costs to the crushing plant, and transfer to the stockpile by conveyor belt.
Table IV. Operating Costs for 10,000-Barrel-a-Day Shale-Oil Plant COST OF CIU'DK
On.
Item Costs of operation and maintenance Mining and crushing Retort inu General facilities chargeable lo crude oil Utilities chargeable to crude oil" Total direct cost Fixed costs (depreciation r \ taxrs, insurance) Total cost of c m d e shale oil
Cost/Day $ 6,005 3,056 822 966 $10,849 4,125 $14,974
Cost/Bbl. of Crud e Oil $ 0 . 600 306 082 097 $ 1 . 0S5 .412 "$1T 497
C O S T O F R E F I N E D PRODUCTS
Cost/Bbl. of Refined Cost/Day Products Item Refining operation and maintenance $ 0 .758 $ 6,705 Refining Pipe lines 54 .006 1,231 . 139 General facilities chargeable to refining 1,890 .215 Utilities chargeable to refining" $ 9,880 .118 Total direct refining costs 4,477 .506 Refining fixed costs ( depreciation*>, taxes, insurance ) $ 1 .624 $14,357 Gross cost of refining 14,974 1 .694 Cost of crude shale oil $ 3 .318 $29,331 Gross cost of refined products (av. of 7 . 9 0 cents/gallon) Less by-product credits 0 .229 2,025 Ammonia at $75/ton 188 .021 Coke at $3/ton $ 3 .068 $27,118 Net cost of refined products (av. of 7 . 3 0 cents/gallon) a Includes water, steam, and electricity at prices adequate to cover cost of maintenance and operation, depreciation, taxes, and insurance on utilities. b Based on expected life of individual units of mining and crushing equipment, giving average depreciation o f 13.5*7c/year, and 15-year payout (6 2 /3%/year) for other plant items, except utilities.
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a n d could not absorb the output o f a 10,000-barrel-a-day plant at the present time. Construction of a p i p e line of 5 0 , 0 0 0 - to 100,000-barrel-a-day capacity could provide transportation to suitable c o n s u m i n g centers for a total c o s t of s o m e w h a t less than 1 cent a gallon. In this case, however, five plants of 1 0 , 0 0 0 barrels a d a y each w o u l d have to be built t o supply the pipe line, w h i c h m e a n s a large capital outlay for b o t h plants and p i p e line at the start of commercial development. Estimates have b e e n prepared of the capital investment and operating costs for a 30,000-barrel-a-day coal hydrogenation plant w h i c h uses any o n e of several coals. T h e estimates are based on a modernized hydrogenation plant using postwar improvements. T h e Bureau of Mines spokesm e n point out that the estimates include data based o n some equipment w h i c h is in a d e v e l o p m e n t stage and has n o t b e e n tested for the particular use proposed. T h e daily production from a 3 0 , 0 0 0 barrel-a-day coal hydrogenation p l a n t is s e t forth in Table V.
T a b l e V. Coal Consumption and Products Bituminous coal, ton/day Run -of-m ine coal Moisture ash-free coal Production, bbl./day Gasoline Liquefied petroleum gases Phenols Total
13,117 10,089 21,630 7,140 1.23Q ( 4 5 0 . 0 0 0 lb.) 30,000
T h e gasoline is a high-octane a u t o m o tive gasoline low in sulfur ( b e l o w 0 . 0 1
