Cheap Coal to Oil

This is only in fetus phase, so it's uncertain to predict where this will go, but University of Texas Researchers of Arlington say they have developed a method of converting lignite (brown coal - lousy stuff) into Texas intermediate-quality crude oil - at a price that's roughly half, $35 instead of $65 or $70.

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In a few years, the researchers predict, their discovery could lead to oil that costs $35 a barrel instead of the current $65 to $70.

This could translate into a Lone Star bonanza. Texas sits on a 200-year supply of lignite that's easily accessible because it lies near the earth's surface. Lignite, one of the lowest and cheapest grades of coal, is now used to fuel steam-electric power generation.

The research team had three goals according to the article:

• "To produce a quality oil out of coal."

• "Get the production cost of that oil down to at least $35 per barrel."

• "Come up with a concept for refining the oil."

The team has accomplished all those things, Billo said, and coming up with a way to refine the oil was key.

The group developed a microrefinery that can manufacture oil from coal without the huge financial cost associated with traditional refineries.

"The team's microrefinery would fit anywhere you could put a structure that's 20 feet wide by 20 feet long by 20 feet high," Billo said. "Each microrefinery would cost about $5 million and could produce 500 to 1,000 barrels of crude per day."

Billo said that $5 million may sound like a lot – but not when compared with a traditional refinery, which costs "from $800 million to $6 billion, depending on the size and the real estate."

[...]

UTA's methodology was based on work at the University of West Virginia, which holds patents on converting bituminous soft coal, a much higher grade than lignite, into crude oil.

The two schools still work together, but UTA found that working with lignite presented demands different from those of bituminous coal.

"By producing an oil between light sweet and heavy crude, we surpassed our expectations," Billo said.

"We spent the first year proving we can make good oil. Next year, we expect to improve the quantity. We should be able to get two barrels of oil out of a ton of lignite. "In the next couple of years, lignite will be selling for $12 to $14 a ton, while bituminous will cost $60 to $70 a ton."

"In two years, we want to have built an industrial-size refinery. We want to ramp them up to 10 [microrefineries] side by side, producing 10,000 barrels a day, just a pittance. But it would blend with other crude regardless of its weight."

Guido Verbec of the University of North Texas Chemistry Department analyzed the UTA oil from lignite and said: "The distribution of the hydrocarbon chains are between C23 and C33, so that's a good distribution and looks more refined than standard crude oil."

- Brewskie