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Diplomacy in Action

A Tale of Two Fuels: Competition or Convergence of Oil and Natural Gas


Remarks
Office of the Science and Technology Adviser
Dr. Devinder Mahajan, Professor and Co-Director of Chemical and Molecular Engineering, Stony Brook University; Scientific Staff Joint Appointment, Brookhaven National Laboratory
Washington, DC
May 9, 2012

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Bill Colglazier:

Well let me welcome all of you here. My name is Bill Colglazier, science technology advisor at State and I’m very pleased that my office gets to help with -- steward the Jefferson Science Fellow Program which is a tribute program here at State for those of you that aren’t aware of it; and this year there are 13 Jefferson Science fellows at the State Department and five at U.S.AID. We’ve had a series of terrific lectures by several of them this year and a few more to go. Next year we’ll have 13 more fellows that will be coming in and choosing their assignments in the State Department later this summer.

Well today we have Professor Devinder Mahajan, a very distinguished professor at, I used to call the State University of New York at Stony Brook, but he has told me now it’s called Stony Brook University. He also has an appointment at Brookhaven National Laboratory. He’s a world class expert on energy technology; particularly alternative energy as well as fossil fuel, though he says he doesn’t like to deal with nuclear, but we can ask him questions about that. He received his Ph.D. from the University of British Columbia in Canada. He is Associate Editor at the Journal of Renewable and Sustainable Energy. He serves on the editorial board of several journals, the International Journal of Oil, Gas and Coal Technology, and the Open Petroleum Journal. He has given many invited lectures on clean energy topics. He holds a number of patents and he has over 200 publications. This year he’s been spending his time in the brand new energy bureau covering issues that include oil and gas, also energy issues in India, and he’s also been the State Department representative to the International Energy Agency Committee on Energy Research and Technology. So we’re very pleased to have him here today and look forward to his lecture.

[applause]

Devinder Mahajan:

Thank you Bill for a nice introduction. What I want to do is -- so it’s a tale of two fuels, and oil and gas. So hopefully by the time I’m done you will understand why the title was chosen and you have to wait until I get to the end for that. I just want to put up a disclaimer. So this is just purely my own opinions and does not in any way represent the views of the U.S. government.

Okay, so I thought I’d put up this slide first just to make sure that you know exactly where I’m coming from in these two places. So if you do not know that DOE National Laboratory System did about 11 of these major labs all around plus a few small ones, and Brookhaven is right on here in this corner, almost falling into the ocean on Long Island, it’s right here. And Stony Brook is on North Fork and if you just want to -- so JFK’s right here, we’re about 16 miles from there, and the island is about 120 miles apart from point to point. Okay, so up front I would like to acknowledge obviously the Office of Science and Technology here. State Department, [unintelligible] and my bureau, and especially the fact that all the people there are very helpful and have been able -- at least some of them have been able to interact, it’s actually now becoming bigger and bigger, but when I started there were only like 10 or 12 people in there. There are several of them who are here in the audience, so I just want to acknowledge that and obviously STAS office. I know there are two people here from National Academies and I do appreciate for them to be here because we are also involved with them.

Up front, I would like to acknowledge a lot of data sources that have been very, very helpful actually in terms of putting this talk together, and one of them that really I would draw upon is the Golden Age of Gas is International Energy Agency’s report that came out last year, I believe was in November, and before that “Beyond Oil and Gas: The Methanol Economy.” This is a book that came out I believe in 2006 or 2007 and now there is a newer edition of that written by the Nobel laureate George Olah. He’s at University of Southern California and heads the Loker Hydrocarbon Research Institute. So I just want to acknowledge all these sources. In addition, obviously there is MIT report, Shell Energy, and BP stats for energy reports also.

So what I’m going to do is walk you down with a very energy basics to be -- to start. Go into little bit in oil and gas, and then because the field is so huge, oil and gas, I’m just going to try to focus on transportation factor because that’s where the -- my case begins in terms -- of where there I think is a role of gas moving to oil markets, and then I will talk about -- that’s exactly what I will talk about production of gas to displace oil. And then obviously nothing -- none of these things are all -- these are policy, but what drives especially this country is the advanced technology so I’m going to talk about all the science and technology in this.

Okay, so this is my favorite slide. Question really is -- so I’m going to walk you back roughly 1.4 million years ago where supposedly the fire was first -- was how to light a fire, and the question is what’s wrong with this cave? Or the picture of the caveman? Well, he’s burning something here, and while the time is done, he is going to put out CO2. He’s also put a lot of black carbon, the way he’s burning it. And there’s going to be some ash left, and depending on what he’s burning, there could be heavy metals in there. So all these things are things going to probably be addressed in this seminar, so this is my favorite slide. Now this is -- I took it out of web, this. And this actually holds true for all the transportation fuel that we use, they are combustion. So there’s no question that in terms of energy efficiency, we are so far behind. I think that’s the low-hanging fruit, so this is a very, very profound statement from that point of view that all we do is with light something in the confined space, try to extract as much energy as we can out of this, and then useful energy, but the rest goes to heat, waste heat. So that’s a big challenge. And that’s why I just highlighted here this process here is combustion.

Now one point I want to make is the way things are looking here, good thing I’m just bringing you back in the present now, if there was and EPA OSHA at this time, this cave is going to shut down. Okay, so let’s go to some serious business: global energy supply. So I’m going from 2000 to 2030 here in this graph, there are a couple of things to notice. After that, if I just take fossil fuels; coal, oil, natural gas and add it up, up to here, look at these three here, these sections here. You can see already they it doesn’t matter going into 2030 or even going into 2035, huge numbers. They don’t let up. I mean, they’re a major part of the equation. It doesn’t matter how much we want to get rid of them, you can’t. That’s the scenario. And the top part here above this brown color is the renewables.

Now as you look at this, yes, they’re increasing but this proportionally these are increased much faster than these are, and just to give you a little idea -- and by the way out of these renewables, biomass, derived biofuels make a big impact, and then solar obviously is making a dent here, but it’s very, very small. Just look at this numbers here. So 2008, 2005, there’s another source, IEA source that I have converted these numbers are in million ton or equivalent. So as you look at these 2000 to 2035, we have overall projected in energy increase of about 36 percent. Percent in mix, right here. They go only slightly down from 81 percent in 2008 right here to -- 2035 down to 74 percent. So we only have renewables, only 26 percent in this picture. So as you see with -- so what do we do with this?

Well, before I go into that, what are the factors in this increase in this demand. Well, let’s look at the world population 2050. So here are the numbers, these are more relevant I guess here is 2000 number is six billion, and it goes up nine billion in 2050. Fifty percent increase right there. And notice here, that the non-OECD countries, mostly Asia, is where the increase is going to come from. Second, now that’s a very worthy cause, and that is we should look at this graph here from World Energy IEA report. These here are the number people who are without electricity, and if you look at that the numbers -- see the population is going up. The number decreases over a little bit, over -- in 2008 it’s about 1.4 billion, and goes down slightly to 1.2; but still a lot of people still in 2035 are still without electricity. I mean that’s a very sobering statistics. Especially in Africa, look at this. This number’s actually gone up in here but everywhere else is decreasing.

Now, in addition to that, if you look at this graph here is even -- energy per capita use. World is right here, okay. U.S. is all the way up here, about 8,000. And here is mostly Europe. So just take a guess how much energy is going to be needed where most of the population is now -- the rest of the world is try to get up to even to the 4,000 level. It’s a factor of about three or four right there. So -- but the thing is what are you going to say? Don’t do it? To all these people, don’t come up here? But you cannot do that, so therefore it -- why you see the energy demand is increasing so much over graph I just showed you.

So with that comes the problem. And that is this is your CO2 ppm 2011, 392 ppm, and I just put a picture up there I thought was cool. You can actually monitor these things from satellite. The red actually shows 385 ppm and blue is 360 ppm. But, if you look at this, under the scenario we just talked about, from 2007 to 2035, these numbers of course CO2 number is going all the way up to about in -- even 2035 we are talking about 42 gigatons or billion metric tons of CO2. So if I take this into account; comes the real challenge, which is the climate challenge. So here is a scenario for the amount of CO2 that we are producing in 2010, and if we don’t do anything, and just look at the projected increases I just showed you; we are on this trajectory here, 6 degree Celsius increase in temperatures. We don’t want to be on that. Obviously there’s a lot of debate in public; everybody’s aware of that, and what we are trying to get down to is this green line. Can we by 2035 start decreasing the CO2 output in the atmosphere down to this level about 22 from 30 now, which in projected increase about a little over 42 or so, down to this number.

But here’s the problem with all the debate for the last five, six years is going on, we should look at this. The window is going to close very soon. By 2017 we are locked in. Then nothing we can do anymore to come for this 2 degree Celsius level; and what I will do is after I go through my presentation, I’ll just show you what are the projections if natural gas is substituted in certain places for oil and where we can get on this graph.

Okay, so here is the problem. Problem is -- and by the way this is the only equation I will show you, I promise that. But it’s a very fundamental -- and that is any fuel that we burn is a hydrocarbon, has carbon and hydrogen; those are the energy molecules. Why? If you -- when we combust it, do you remember my caveman picture? Combustion, and that is air; we take oxygen out of air, we burn the fuel, and we produce CO2 and water, and when you do that, it comes with a lot of what they call heat or combustion, it comes with a lot of energy and that’s what we want. That’s what everybody’s after. What I’ve done in this table actually is -- and I want to point out here, so these first gasoline diesel, they are a part of oil, gas and coal -- natural gas and coal. These are all fossil fuels. Bottom, they could be derived from renewables.

Now, what are the factors that drive our selection of energy source, what we burn? Well, whether it’s a primary source, or is a secondary source. Example: all these up here are primary source. Primary source means you’re going to pretty much dig it out from the -- like oil, or gas, or coal. It’s right there, you dig it out and that’s primary source. All these but are listed hydrogen. Hydrogen is not a primary source; I can’t just dig it out. I have to produce it from somewhere, it’s a secondary source, and that has been a problem with the hydrogen not making it to the hydrogen economy because where do you get it from? That’s the main question. So, but the second point I’m trying to make here is energy intensity. Energy intensity per pound. If I took one pound of the material, any of these materials, you look at the fossil fuels, they are all very, very close to 20,000 -- gas actually is 24,000, very close. Very highly intense per pound. You can get a lot of energy out. And what that does, well first thing is these are renewables like wood biomass, ethanol from, say, corn, hydrogen -- well hydrogen I told already what the problem is, although it is the best number is right here 61,000, one part of hydrogen is a lot of hydrogen. You have to get it from somewhere and that is where the problem with this is. So if I exclude that, problem with renewables is, they’re dilute energy source means you need more of this to get the same amount of energy compared to fossil fuels.

So intensity’s a major factor. For the third factor, so what happened to these is cost. End of the day, it’s the cost that matters, and because of the intensity these things are inexpensive compared to everything else we’re trying to do, but the question that comes in: do these collide? Of course they do because CO2 emissions is the problem then. On this side I have given you relative emission numbers I took from the intergovernmental --this climate change paper the per part values, these are ton CO2 part energy -- energy, oil, gas, and coal. Because I’m going to focus on that because you look at the gas, CO2 emissions, no question about that. That is much lower 80 percent lower than coal, but 40 percent lower than oil; so if there’s anything that makes sense, it’s the gas that makes sense in the fossil fuels. And you know what? There’s a reason for that, why this is slow, and for that we actually have scientific basis, hydrogen-carbon ratio. Methane is primary component of the natural gas, therefore it has, for example, CH4, there are four hydrogen per carbon in methane compared to oil which is about two, and coal -- I actually was being nice to coal actually is about 0.6. It’s less than what I put in, but actually more -- it’s less than 0.6. So therefore, all the problems of emissions that you see associated with these fuels is based on that, and I actually believe even go as far as to say, that probably if you took everything even renewables this point, natural gas does make sense because the way it burns and the amount of emissions that come out.

Okay, so that was my very fundamental energy basics that I want to talk about. Now I’m going to get to oil and gas. Oil; oil is not simple oil, oil is not gasoline, oil is a very complex molecule. Why? You get this oil off the ground, put through refinery, very sophisticated refinery, and you get all these products out of this one barrel of oil. What are these? Gasoline for the cars. Jet fuel for the planes. Diesel for the trucks and everything else that go with. If you take all these fuels out of this, fractions that come out, they are actually are close to 75 to 82 percent, and by the way, you can depend on, for example, European refineries are more geared towards making diesel fraction more than compared to U.S. which makes more gasoline because of our needs, because we use more gasoline than diesel, Europe is opposite. So look at transportation factor in this oil; of course about transportation fuels are the principal components of this. Of course this goes with heating, home heating and so on and so forth, the rest of the stuff.

So this is my very involved picture here, U.S. energy consumption: petroleum, natural gas, coal, renewables, and nuclear. This is our mix right here. Petroleum is at 37 percent. What is the end use for these transportation industry, that is just commercial electric power. Notice something, electric power is huge and most of, actually a lot of natural gas goes into that. Coal is primary, 92 percent goes into that. But I’m going to actually talk about right here the transportation sector because I think that’s where one of the issues is that need to be addressed. If we’re going to have gas making to that transportation center. So, but look at the numbers. So 71 percent, what about natural gas? It’s only 3 percent right now going in into the transportation sector.

Okay, so I’m going to move on the natural gas. This is where all the fun has started for the last few years; global supplies; about 808 TCM, and by the time this number put up I think it has already increased, because we are finding gas everywhere. Everybody’s finding gas everywhere. About 250 year’s worth. That’s the estimate right now. It will last for a long time compared to coal which is about 100 years, and oil; they keep finding oil too; but right now say about 50 years. So question is, will natural gas replace oil and in what shape or form? Can it provide the energy security for the U.S. obviously because --this slide is a very interesting slide. So this slide, I’m going to just go back here this scale here, represents right here how many TCF I get really confused sometimes because most of the EIA, which is the U.S. reporting agency, we still talk about TCF trillion cubic feet whereas everybody else talks with BCM. All the reports are billion cubic meters. So our TCM trillion cubic meters, or metric units, but anyways. Relative numbers; interesting picture.

This is a picture about two years ago, 2010 picture. Before that, just imagine if we took that out, only leave the blues. If I just leave the blues that the conventional gas, U.S. very poor in conventional gas compared to rest. So are everybody else, but all of a sudden, if add on this top nice colors here, this red and green; this is the tight gas, and coalbed methane which is CBM, and the shale gas together is called unconventional gas. If you add that up on this; on top of this, what you have are totally different picture at this point. In fact, although you have to admit; this is Russia, former Soviet Union FSU, Middle East, they still come out pretty good even with these put together. Although Canada and U.S. I mean, their numbers are pretty high at this point in terms of the supply.

Now, I have shown these numbers on this, but in terms of production, is the U.S. right at home that is leading the revolution in this case. In the last couple of years, it has come to a point where we are going to become net exporter of natural gas from a lot of net importers a couple of years ago. So, this is what I want to call is a supply of plentiful gas, and what has that done to the price compared to oil? This is a really interesting graph. Just to give you an idea, natural gas and oil prices you got to multiply the price of natural gas million BTU by a factor of six to make them equal energy equivalent, okay? But after that is all cheap gas. Therefore, look at what has happened since 1994 to 2012. Normally, if you look at this except for these two spikes here, where the natural gas prices spiked up because of the shortage, normally it has historically -- it tracks pretty well about minus 20 percent range or so in this range here. Look what has happened since -- especially after 2006. Look at the price. In fact this price here is today’s price which is less than $2.00 million BTU and that puts natural gas to about $12 million BTU equivalent -- sorry, no, $12 a barrel oil equivalent. Huge difference in oil and gas prices.

So there’s no question then all of a sudden which U.S. business and business everywhere else; what are they here for? To make money, and also come up with innovative way to exploit these resources, and that’s exactly what they’re trying to do that if we do have such a inexpensive gas in this county, or anywhere and everywhere else, why not exploit it and to do that. So therefore, those two, the supply and the cost is really opening up a lot of opportunities in this area.

Now, I want to spend a little bit of time on this. So what has happened here is the production numbers as U.S., by the way, is -- was almost -- is number one and number two producer last year next to Russia in terms of the amount of gas produced. So this here is -- you see is unconventional gas, this is a conventional gas production for 2010 numbers, is about 3.3 TCM, trillion cubic meters, and out of that, this number is about 16 percent or so is the unconventional gas which was almost nothing five years ago, and is mostly the U.S. So we are basically driving this whole thing, the gas revolution. Also, something that people do not appreciate where you -- when you increase the gas production, there are associated what they call natural gas liquids which are little higher hydrocarbon than methane, ethane, propane, butane, and so and so forth. They go back into the gasoline pool also used, so there are associated natural gas liquids that you also get with natural gas, so that’s added benefits.

Two more things I will talk about that because that is not addressed, and that is a flared gas and renewable gas also not a part of the equation, although it’s not showing up right now, but go into the future, it should. Then -- but the thing is we have a lot of gas. So what’s going to happen? There’s always a mismatch, so you have gas here, people are here, for example Asia is starving for gas, Japan is starving for gas because of post-Fukushima. So what is going to happen, we need move this gas to where the people are. So we have a couple of obviously traditionally pipelines are the way to go. Pipelines are always, always there internally, especially on land, but even undersea everybody is doing that, but LNG is actually becoming more prominent in this area for transport.

So I will actually spend the next spend a little on LNG. LNG stands for liquefied natural gas. It is gas, but is liquefied, and just a very simple reason: so that we can transport easily. Okay, so once it goes to the intended destination, what are the end use for the natural gas? Well most of is going for making power, so you can back out of coal, which is already happening, and you can use natural gas. Industrial, other processes, steel-making so on and so forth, but for the transportation sector that I’m going to talk about, you can also that called natural gas vehicles, you can produce -- you can also use natural gas as a compressed natural gas which is CNG vehicles, or LNG: vehicles that are also coming out, it’s a very, very small market. And then liquid fuels. There’s another option. Gas is something that you can actually convert into liquid fuels, and that gives you a little better flexibility in term moving the gas around to the markets because gas is a liquid fuel. You can actually make fungible hydrocarbons. You can make diesel out of that. You can make gasoline out of that, and the car doesn’t know where it came from. It’s exactly the same molecules, so you can substitute. So there are fungible hydrocarbons you can make from gas.

LPG supplement [spelled phonetically], I don’t want to spend time in that, but this is actually really exploding in Asia, and some of the liquids that are coming out of this, but I think these two are the new markets that are coming up. One is for the diesel substitute natural gas, and also is a fuel extender, and I’m going to spend time on these. So for transport purpose, we have liquid natural gas shrinks volume by 600 times if you liquefy, if you cool it down to minus-162 degrees Celsius, it goes down about 600 times, means the same volume you can now have a lot of gas come in. Therefore, it makes it easier to transport. But it comes at a cost, because you need an infrastructure. Liquefaction terminal, so wherever you are going on the export side, you will need a liquefaction terminal, and then once you have that, you have liquefied it, you will need a dedicated LNG tanker. That’s going to carry -- these are funny looking tankers with these domes for a reason. They cannot use your regular liquid tanker. These are dedicated tankers for LNG and the regasification. Once it arrives at the port, at the receiving port, you need a regasification terminal so that they can then vaporize and make it again to natural gas.

Now problem is right here, cost for $1 billion per billion cubic centimeters is for the cost is to do this. LNG tankers, typically about 33 million gallons it can carry LNG. Cost: 0.2 to 0.3 billion. Regasification terminal at the receiving end. One billion for the 10 BCM; not small numbers, but people are still making these investments to move gas because this is still cheaper than trying to build pipelines or you do not have an option of building a pipeline, so therefore projecting into -- from now into 2035, I think it’s how it’s going to be one to one projections from LNG versus pipeline how the gas is going to be moved, and the numbers are about 620 BCM gas will be moved by these two numbers -- these two options.

Okay, so let me know focus a little bit on the transport sector. We know we run cars on gasoline, but there are other parts of the world -- I mean very few in the U.S. but other parts of the world we have in fact globally about 12 million CNG-run vehicles. These are compressed natural gas, and what you do; here’s the tank, it’s a high pressure tank because to make the -- the problem I told you before, problem of the gas is that you have to really get a small volume for it to have a meaningful in terms of going distance. So in this case, you pressurize this tank at fairly high pressure to 3,000 psi, and that’s what this tank is in a car, then you may be able to go still not the same distance but at least meaningful distance. The reason you don’t want to go higher than this is because then the cost is very prohibitive number one, number two is becoming more dangerous to carry around 7,000 psi tanks. But -- and there’s another problem in the U.S.. U.S. we have long distances people travel. Other countries, they are smaller distances. They can actually -- for example, Pakistan. For two million vehicles are actually run on CNG. So -- but 20, 35 projections from the gas scenario, that’s the IEA report where it’s called a gas scenario, where they say the gas happens, this, this, and this, where we go with this. So then the gas scenario from IEA, projected number is about 70 million from 12 to 70 percent of global fleet, but still a very small 4.4 percent, but the natural gas usage is also very small, is about only 3, 4, 5, .4 percent the total, because the projected at this point in 2035, natural gas is going to go 5.1 TCM global number. But if we did that, that net oil reduction potentially is not small, is 2.3 million barrels per day oil we can back out by using compressed natural gas for road transport, and because the numbers I showed you with a CO2, the reduction potential here also follows that to 25 percent. So not a bad thing to do, but what are the constrained in these things? Problem is it needs a gas distribution structure so you can have these high pressure filling stations all around just like your gas stations so people can do that.

So what is our second option? I think that is where I’m going with this. Can we convert gas into liquids and then use that? Well, in natural gas, this black box is -- what you do is thermal process that produces a bunch of gases here, and depending upon what you want, you can actually make everything that I’ve listed here, all these fuels. Now what is this? Ethanol everybody knows. In the U.S. we make ethanol from corn through fermentation process, but you can also make ethyl from natural gas. There’s another thing coming on the horizon to compete with the ethanol is butanol, because it has more higher energy density. DuPont and some other companies in fact are having a commercial plan coming up pretty soon online, but -- and the second one here, I did discuss that, that is your drop in replacement fuels, fungible hydrocarbons is a known process. You can actually process the natural gas into these liquid fuels, and last one actually which is not liquid, but you can also get hydrogen out of that, and in fact just to give you an idea, most of the hydrogen comes from natural gas at this point; about 75 percent in the whole world.

So I am going to talk a little bit about this, methanol and dimethyl ether, the reason for that is because these things are already showing up in the Asian markets as a substitute for fuels. So if we’re did that, turn gas into a liquid, any of these, see oil has a liquid infrastructure. It doesn’t need any new gas stations to do that. You can have the existing liquid fuel structure. You can actually use those. Second, that allows us then very smooth transition from the oil, from the gas, into the oil markets.

So let me focus actually on methanol and dimethyl ether as a transportation fuels. Methanol is a very interesting molecule actually. As a fuel, you can directly use it as fuels. Everybody knows in the [unintelligible] they use methyl for a very long time in a race. Race cars use fuels all the time because more efficient. So it’s nothing new about that. Dimethyl ether is actually a quite interesting, derived from ethanol, as you can directly make from ethanol. Dimethyl ether has two -- so methanol you can actually do two things. One you use as a neat fuel; 100, don’t need any gasoline, or you can use just like we do with ethanol right now, and that is M15, 15 percent methanol in gasoline. DME actually can be a direct diesel substitute with a minor modification to that diesel engine trucks, you can run the whole truck on DME, not on diesel. You can totally back out of diesel, so it’s a very good replacement diesel substitute. And, which is not a part of my talk, but this is driving another thing here is that countries like China, Iran, and everybody else are using cooking fuel, blending with propane, LPG, with a DME 20 percent blend. You can also make gasoline directly out of methanol just like you have same gasoline that you put in your cars a replacement for petroleum gasoline. It will -- the car will run and not know the difference where it came from. And this process, by the way, from methanol to gasoline process is called the MTG process, the methanol to gasoline process that was developed by Mobil Oil Company and it was run in New Zealand commercial plant for a long time in the 1980s. So all these technologies that I’m talking about, they do exist.

So what is the market there for the liquid fuels here? U.S. market renewable corn ethanol. We have a 10 percent blending. We can go only 15 percent, then the blending, well, you can’t go more than that. Global markets is where the real action is. Brazil; we actually -- U.S. and Brazil the only ones who have embraced ethanol because for Brazil it makes sense. They have sugar, and all the waste goes to make ethanol. Perfect thing to do; integrate it. So we actually account for about 87 percent of the global ethanol market for consumption. Okay, what about the rest of the world? Well, they are not doing anything except burning gasoline and diesel. So if what happens, now I’m going to give you a scenario. What happens if we blend methanol with gasoline at 15 percent. There’s no problem there, or dimethyl ether, substitute for diesel, or mixing with LPG. Well that I’m not going to talk about too much, that’s cooking, but here is the transportation sector right here.

So this technology status for these things mixing, blending is going on right now in commercial trials in China and Iran; and here is what is the number are, so to give you the numbers; so what I have done with these numbers is I have converted these numbers 2011 numbers, and I converted these number to billion barrels of oil equivalent per day so you can actually look at these numbers and say, “Okay, this much oil we can back out.” These are all normalized numbers. Total global production of methanol, the reason I put this number here together is because methanol -- DME’s derived from methanol. So I have put the number together both of these global production for 2011, 560,000 barrels of oil equivalent per day. China; this number actually is their -- not the production, but actually the consumption number 55,000; very small number because they are only trying one province this year. This is 15 percent volume gasoline in China, and DME numbers is 32,000 in China. 2020 China is developing the infrastructure to go for DME to 300,000 about 10 times in about 10 years. Iran, surprisingly is also -- because I don’t know this or not, they export oil, but they don’t have enough refining capacity so they actually need 80,000 barrels per day oil coming back to them, refined gasoline.

So therefore, their idea is that if they could actually use methanol, they could back out of that 30,000 right here, this is going on right now in Iran to look at the trials in this. Now for China, this number here is only one province, and either -- 7 percent of the gasoline pooled in China. If you look at the numbers for China, this year is about eight to nine billion -- million barrels per day in numbers for the consumption of gasoline. If you do that, this number actually explodes to about 1.35 million barrels per day for oil you can back out in China. So the numbers are actually fairly staggering for this. So I did it just to give you a flavor; if I took all the gasoline in 2035 projections, gasoline and diesel, remember both of these come out of oil. So 27 million barrels per day, diesel, 36.5 million. If I took these numbers and I said, “Okay, instead of purely burning these, why don’t I mix half, a 50 percent methylene gasoline M15, I back out. I need four million barrels per day. Remember this number, global number includes the U.S. number which already uses ethanol. I took that out; the net global demand and for methanol could be 2.7 million per day oil equivalent. DME replaces diesel at 10 percent, 3.7 million per day. If I took these two numbers total potential oil displacement is about 6.4 million barrels per day. It’s not small number. Huge number, and I’m only talking about just right now only 15 percent. The last slide I showed you actually had a number that China planned to produce car to run on totally 100 percent on methanol as well as 80 percent methylene. Those numbers obviously go up by factor of five.

So I just want to give you a little bit of a flavor for where the gas can actually start making -- backing out of oil, and gas starts going as a liquid. Now, source of gas for GTL. Where will this gas come from or what the magnitude is. Not that much. This in billion cubic meters. In 2010 it is only hardly 10 BCM. Remember that we use, in 2010, 3.1 trillion cubic centimeters -- cubic meters of gas, and only 10 was for gas to liquids. In 2015 there are two plants coming online for methanol and also for hydrocarbons made from natural gas in Nigeria and Qatar, and, therefore, the number has gone up only to 25 BCM, not a big deal. But there are other sources I pointed out to you. There is flared gas, which is about 134 BCM per year, has no use; it's just being flared. And I'll show you in the next slide, it's really an issue. Renewable gas, we produce in landfills about 45 BCM per year. If we increased our gas use only by 15 percent -- and that doesn't take too many of increase, because we have 250 years of projected supply -- we can actually only need about 495 BCM. If we did that, the total of these come out to about 675 BCM of natural gas. That equals about 14 million barrels per day of methanol, and that translates into equivalent oil displacement potential of seven. The reason is because methanol has only half the energy of oil, so, therefore, you divided it by two: seven million barrels per day oil you can back out, not a small number.

So I just want -- this is something very important. This is what I was talking about, the flared gas. This is totally flared, had no use, mostly in Nigeria. Nigeria is one of the biggest countries that flares it. It's about 5 percent total gas usage, this number. And puts out about 400 metric tons of CO2, or 2 percent of global CO2 emission just comes from here. So the reason for that is their policy issues. They don't have -- they have limited access to international and local gas markets, lack of financing for infrastructure, and undeveloped regulatory framework. Some ways, maybe the U.S. can help to move it forward. So the World Bank has an initiative called Global Gas Flaring Reduction, GGFR Initiative, and that initiative is exactly aimed to see what can be done to this gas utilized not, to just flare it and put CO2 in the atmosphere. And interesting is that alone will be 1.4 million per day potential right here, and that number was included in the last slide I showed you. If you ever have time, just go -- just search GGFR on the internet and watch YouTube, has really cool stuff with the flaring that's going on all around the world. It's a really cool YouTube video.

So, since I'm in the building where cook stove is a big deal, I thought I'd throw this. Cook stove and black carbon. This is a NASA image here of the black carbon. And what is our approach in this building is we are going for better cook stoves, and we have made a big inroads in this area trying to reduce carbon in the parts of the world where they are producing all this black carbon, because they are just using stoves open, just what I showed you the caveman was doing; they’re no different. It's exactly what's going on. So what happens? Transition to cleaner fuels, like DME, derived from natural gas, may be the next leapfrog technology. And this thing actually -- this thing, I took it from the web because there was a presentation for Mongolia in the recent conference, and China and Mongolia actually are looking into this, especially in Mongolia. Mongolia, some of the places are, like, terrible in terms of air quality. So there's a big push in the next five years to replace going onto DME as a fuel to address those issues. So I thought I'd at least put that out.

I think I'm almost at time, so let me summarize then. So I'm going to pose a question. The question was, "Is gas a bridge fuel going from the carbon economy into whatever known carbon economy we are aiming for?" At a low-carbon economy, then you are looking at all these words coming in. Low-carbon economy, whatever you want to call it. Well, how do we get from here to there? There's no question gas is a good bridge, okay, because it's a cheap source of supply, but also less CO2 directions at the same time. Gas conversion to liquid fuels allows infrastructure that’s compatible already with oil. Gas should be really viewed, as I said before, as I emphasized, as a clean extender of oil pool, not as a competition but actually as a clean extender. And next thing is very important, because what I have told you so far, we still have a way to go in terms of the commercial processes to develop these liquid fuels, to get to a point where they start competing equally, head to head, with LNG and other technologies. We are almost there, but it's about here. We need to come up to here. So, therefore, no question that science and technology play a crucial role in process development, and there a lot of good things coming on those lines. I don't have time to go through that, but I think we'll get there. And if there's anything, Caribbean and Pacific Islands, they are terrible at this point. All they do is they get this diesel from tankers, and they just keep on burning. That's all they're doing. This could be a good -- this here -- target for -- for diesel displacement for methanol and DME, in those islands, as going forward.

So this is the slide I have. So the gas scenario, the IEA, whatever I have talked about, it puts it about not here, where we are trying to aim at, but they call it 3.5 daily scenario, not two. By doing what I just showed you with the gas, natural gas going into different sectors of power, oil, and so on and so forth, I only covered the transport sector, but if you start substituting, that's where you can get to that. Remember, we want to get over here. We've still got a way to go. But I think that liquid fuels probably can get you a little bit more here, because that was not covered in the gas [unintelligible], that IEA report, so that's why I have just covered. The reason I cover it is just to give us an idea the liquid fuel production of natural gas was when I started, actually, at Brookhaven. That was my first project that I started, developing technologies for that.

Okay, so this is not a bad scenario, considering what we have to deal with in terms of population and other issues. So I'm going to end with this, the remarks by the president on energy. You know what? All-of-the-above energy strategy is the same strategy to go. There's nothing else. Can be too radical, totally, to buy fuels, because there's no way forward with that. So, therefore, I think I firmly believe this is the way to go, all-inclusive. And with that, I -- you don't have to -- you already read that so many times, but I just wanted to point out that producing more oil and gas here in America, that's the way to go.

So, with that, I'm going to end. And thank you very much for your patience and listening.

[applause]

Yes?

Male Speaker:

You mentioned Iran producing large amounts of methanol.

Devinder Mahajan:

[affirmative]

Male Speaker:

I assume they need some kind of a catalyst to do this?

Devinder Mahajan:

Yes.

Male Speaker:

And do you know whether they import the catalyst or they make it?

Devinder Mahajan:

Okay, so -- okay. Iran is a really good position, because I believe in about two or three years ago, they now have the largest methanol production plant at 10,000 tons per day, already existence in Iran. So they have a lot of methanol. So it is no surprise they decide to go with that. Now, there are technology that they use to make methanol, these are known technologies, and the three companies pretty much control it. One is Lurgi Germany. Second one is actually Mitsubishi. But before that, ICI, which is now Davy, U.K., they had pretty much all the technology to make methanol. There are other companies. And in terms of the production, the major player is Methanex. They are based in British Columbia, Canada. And they are the ones who control actually most of the methanol markets in the -- globally. But into the production, yes, there are more technologies coming up, but Iran technologies, if I understand, is one of those three.

Male Speaker:

I'm sure you know why I'm asking. In terms of sanctions and what hurts, this may be a target.

Devinder Mahajan:

Well, they are producing for themselves. That's all I can say. I'm only talking purely from the scientific point of view. Sanctions I don't think I want to talk about, because I don't know about sanctions to say anything about that. Yes?

Male Speaker:

So, Devinder, part of the economic appeal of natural gas and the natural gas derivatives is the price discrepancy on a per-BTU basis between petroleum and natural gas.

Devinder Mahajan:

Yes.

Male Speaker:

But the very large discrepancy that you showed is peculiar to the western hemisphere market, and if we consider natural gas to be three markets, one in Europe and another Asia.

Devinder Mahajan:

Yes.

Male Speaker:

The one that most closely tracks the price of oil is the Asian market for gas, where gas is heavily used as a transportation fuel.

Devinder Mahajan:

[affirmative]

Male Speaker:

So what is your perspective on the amount of natural gas that could be used for transportation before we would start seeing similar linkages in our own gas markets?

Devinder Mahajan:

Very good question. First thing, let me give you a little picture. When I said, in the U.S., right here, we have less than $2 million BTU gas, cheap like hell. I mean, the -- [snaps] -- it can't get any cheaper. Maybe. I don’t know. But you look at the European market, they are paying close to $8 to $10. Japan, rest of Asia, they are more $12 to $14, that range. So there's a discrepancy there, no question, by a factor of seven from one end of the spectrum to the other one. So the question starts coming up is, "Where would you do this?" There is a price-sensitive analysis done, and it compares the price of methanol with gasoline. And, of course, fuel stock is a component of that. So at $4 a million BTU, you are about $1.30 a gallon, equivalent to gas. At $8 a million BTU, you are about $2. So when it gets to $2, remember, then we add on the cost, like everything else, then it starts going up where it was.

So if you're asking whether they should do that in Asia, to make -- depends how they gather gas there. But one possibility, what we have been saying is, "Okay, where the gas is, convert that right there into liquid, and then transport in the regular tanker, like you do, and transport that." It is not that you transport LNG to Pakistan, for example, and then start making methanol. That's not going to make any sense, because it expensive. But if it was delivered, the price is $12. So that will not make sense. So only thing is, within the countries, supposedly Pakistan, for example, they have found a lot of -- in the northern regions -- gas fields. It can help develop that, their own, not with imported gas. It's a captive gas they could utilize right there. And one thing I have always said: if you find gas here and you can use the gas here, don't do anything with it; just use it. Don't transport it. Don't do anything. But for them, the countries starved for energy, that makes sense.

But from here in this country, for example, right now what we have, maybe the best option is to also start making. And, in fact, that -- just to give you an idea, two months ago, Methanex actually announced that they owned a plant in Chile that came online about 12 years ago. They have dismantled that because Argentina shut the gas off, so now what they're going to do is, they're taking the entire plant, this 5,000-tons-per-day plant, and they'll bring it to Louisiana to make methanol in Louisiana. That was shut down five years ago. So, anyways, so the problem is, yes, there has to be going forward. What I have put together, essentially, is purely scientific reasoning. Now, going forward, what we need to do is a little bit different, addressing the markets. Does that answer your question or no?

Male Speaker:

A little bit.

Devinder Mahajan:

Okay.

Male Speaker:

I'm just curious. We've seen other non-petroleum fuels track the price of essentially what the market will bear, which is whatever the cost of the petroleum-derived fuel is.

Devinder Mahajan:

Yes. Yes.

Male Speaker:

And so I'm wondering if you've done the assessment or have any anecdotal evidence to describe what that would be in the U.S. for the local natural gas market to start tracking the price of petroleum as well.

Devinder Mahajan:

Okay, so here, right now, I don't know how long they're going to stay below $2. That's my problem. Answering the question, say $4 a million BTU is probably more realistic to sustain the surplus that we have, because otherwise, the producers have started shutting their wells. As you know, they're capping them now, because they don't want to sell for $1.90. They don't make any money. So if we take $4 -- and even $5, I think, is more realistic -- at $5 if you do -- first convert to energy equivalent, then that's $30, okay, energy equivalent. Now, if you take the number -- give the conversion number, I think it comes to about, I would say, $40, $40 a barrel equivalent, which still is not bad compared where the oil is. But historically what has happened is that as soon as OPEC and other countries who make money out of oil, they see something coming that is in competition, the oil prices start dropping so that -- so that's what the tracking says. It's a little bit more complex, then. But you're asking for parity. I think it's about $40 a barrel at this point will make sense. You can actually produce that equivalent from gas.

Male Speaker:

Thanks.

Darin Tooey:

[inaudible]

Devinder Mahajan:

Yes?

Darin Tooey:

Okay. Darin Tooey. I'm a Jefferson Science Fellow as well, and working in EAPEP, the Economic Policy Office. And last week I was at an Institutes of Medicine. They held a fracking meeting on health impacts assessments. And someone from the Environmental Defense Fund spoke about the global warming impact of natural gas extractions, if there's fugitive emissions. And the interesting result, which is not out of line with what I'd seen before, but I want to throw it out there and have you comment on it, was that anything larger than about 1.5 percent fugitive emission of methane takes away the entire benefit of natural gas. So, essentially, compared to coal, it makes it equal to burning coal. Actually, it may have been burning oil, but it was one or the other. There's a big difference there. But, in any case, do you know about any of those studies? And what are your thoughts about the ability to produce natural gas, not just in the U.S., but also worldwide from all these places that people are finding, at the level below 1.5 percent fugitive emissions?

Devinder Mahajan:

Okay, so let me -- I'm going to answer that question. If the history is any example, all the questions that are coming up with fracking, remember, come down to technology, okay, and that's the only time when there's a problem that is identified -- for example, in this case, with fracking, extracting natural gas and associated emissions -- that is where the science and technology will address that issue that has come right to the top at this point. So if you're asking me to give you some harder numbers, I mean, you have seen the Cornell study back and forth last year, and you know all the numbers there. I have seen those numbers too. All I can see since this problem now is -- well, not problem -- but this is a challenge that has actually now -- is out in the scientific communities, so open. I am a firm believer that in the next year or two, you will start seeing technologies, with recommendations coming up, that can actually then reduce to a level where it will make sense, just like conventional gas. That's all I can say at this point.

But, having said that, I do want to point out -- in fact, Joe here is sitting here. He's in our bureau. Their job is, they have a whole initiative, a global initiative for unconventional gas, just to make sure that since U.S. is the leader, that we are learning from the lesson, that we are learning from everything that you just described, that when we go and help other countries develop this resource, that we are advising them on the technologies so they don't, themselves, go around and start digging something out and it makes it worse. So they're job is just that. In fact, that's what they do. They hold seminars and everything else just to educate. So we, the bureau, ENR, is very much involved in that just for that reason, what you just described. China is the next. If you believe their numbers, now they're obviously saying that they have more unconventional gas than U.S. does. Fine, whatever. These numbers are always going back and forth. But the U.S. engage with China for that reason, because they want to make sure that everything's done properly, otherwise somebody does something bad because they don't know the technology, don't have the know-how. They will blow up something. Everybody gets a bad name. So that -- exactly, the reason bureau is so much involved, and that is why the bureau is important, actually, is there. And I just hope that that is the reason for the bureau to be there in existence.

Darin Tooey:

So, just to follow up, when you were going through the slides and putting this together --

Devinder Mahajan:

Mm-hmm.

Darin Tooey:

-- did you get a sense that we know what they fugitive emission numbers are? Do we have a good handle on that scientifically now?

Devinder Mahajan:

I do have them. I don't have them with me.

Darin Tooey:

Okay.

Devinder Mahajan:

I did look at those numbers. Here's the problem. You have seen the last year's controversy, right, about back and forth between the two Cornell groups, wasn't it? So, yeah, it depends upon how you calculate. I mean, you know what was going on with those two papers back and forth. Again, as I said, because of that controversy, it is out in the open to the scientific community as a challenge. I -- again, I'm a very firm believer in science and technology, so, therefore, you talk to me a year from now, I think you will see totally different numbers, because, hey, it is all driven by curiosity, science and technology, and that's the challenge at this point. So I'm pretty sure we'll have something.

Darin Tooey:

Okay, thanks.

Devinder Mahajan:

I mean, you have those papers anyways. I don't have to give you those papers. But I do have those back and forth commentary going on between the two Cornell University groups. This is the first anybody ever saw there are two groups in the same university actually banging heads. I have no idea how the Cornell University president had to say about that, because one will lose. Anyways…

Gilbert Brown:

For sure, that's not the first time at a university. You cited an MIT study. I think they debate their issues as well. So I'm Gilbert Brown, I’m a Foster fellow, not to be confused with other kinds of fellows, but to be blended, I suppose. And I work in nuclear, which you already mentioned in sort of an off-handed way. And so I don't want to talk about nuclear, but I do want to talk about energy, and I really liked your slide, because the first 20 minutes of your presentation is actually my presentation as well, and many of us who talk about energy and the role of a source that we know about fits into energy. So I wanted to focus you not on transportation but on the use of gas for electricity and, in a related way, the use of electricity for transportation, because if you don't look at this holistically, you know, you're banging your nail into the wood; other people are banging their nails into the same wood, right? And if you don't look at it that way, I think we're going to miss good opportunities, for example, using gas to make electricity, because

coal is what's used almost 100 percent to make electricity. So I'm really interested in gas as a bridge away from coal, and nuclear as well, because these are ways to get -- I don't say off of coal, and we can't, because your slides say three quarters of our energy, and most of that is coal, is fossil fuel. So my comment -- my question is, can you comment about gas for electricity? And that comment about what happens to gas when everybody starts using it, for sure it's not going to be $2, for sure.

Devinder Mahajan:

Okay, so let me answer your first question. I actually had a slide on -- say you go to electric cars, okay? That means -- I think that's what you're offering. You need more power, but you're going to run your car on electric then. And for that, for the delta, you need extra power, you could generate from natural gas power plants. There's no question what is happening right now. Look in the power sector. I mean, our bureau, one of the offices looks at the power sector. That's what they're looking at. I didn't have the time to look in the power sector. Look at the numbers there. I mean, power sector is much bigger pie-wise than the other sectors, okay? But what is happening is, with the natural gas the way it is, and with all the regulation coming in the U.S. for example, EPA regulations for the coal, unless you're grandfathered, or whatever the reasons are, I think you're going to start seeing some switch, okay? Ohio is one of the examples that have just done that. But, again, it's a problem, is that existing infrastructure is the reason they want to go after, because on this list of reason, the reason is because there's so -- I just showed you this -- there's so much extra that we can still build. If you can just address that, it's much easier to do that than trying to have an existing infrastructure that says, "Hey, you stop burning coal and you start burning natural gas." Unless for them, themselves, there's a reason to do that -- and they will go with it. Remember, business is business. It's not a magic bullet.

Gilbert Brown:

Gas is not magic.

Devinder Mahajan:

Yeah, and I'm just saying that I say it's a business. I mean, if they realize that going to gas is cheaper, they will do it. But just saying -- getting up in the morning one day and saying, "Hey, stop all the coal fire plants; let's go to gas," it isn't going to happen, because who's going to pay for it, for the commercial? So -- but they ask, when they develop their own business models. If they find out -- if I convert now -- and if they project those prices for the next 10 years, that the world is going to sustain, that's how you make the decision. So I -- so what I'm saying is two things. One, for the extra power we need, to say we go to electric vehicles, not use oil in the cars, that delta could be built based on natural gas, no question. But any other substitution, that'll be based on case-by-case basis. They have to decide.

Male Speaker:

One last question. Is there a concern about blowing up these LNG tankers in New York Harbor, or something?

Devinder Mahajan:

[laughs] No. Think about it. I mean, those things are fairly nicely built. That's that they look like. And, in fact, it's pretty -- something's very cute about that. You know how they run these things, these LNG tankers? So when the -- it's a liquid, but -- so it's cold. It's minus 162 once in the voyage. So what happens is that during the -- the way they're shaped like that is because on purpose. There's a slight -- they keep -- there's a relief valve. So about 1, 1.5 percent of the gas, actually, is relief. What that does, it actually keeps the rest of the gas cool. And what they do is just have -- I didn't know before I found out. They actually capture that gas, and they have, actually, the dual fuel, the diesel -- not diesel, but bunker fuel, whatever they use -- to actually burn that gas that's coming out of there for the journey. So it's a pretty cool -- pretty cool thing, what they're doing.

But in terms of safety these days, I don't think -- the safety regulations are so stringent. Again, I'm not a safety inspector myself, but I'm pretty sure. The cryogenic technologies that are out there, something like that happening, unless a Somali pirate takes over or something and they're sitting on it, doing nothing -- I don't know. I'm just making this up, but -- [laughs] -- but otherwise, under normal conditions, I don't think you have safety issues.

Bill Colglazier:

Let's thank Devinder for a great talk.

[applause]

[end of transcript]



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