NEWS RELEASE                                                                                                    OCTOBER 2014

The Future of Oil, Gas and Coal Dependent on Perception and Competition

Gas-to-liquids plants can cost up to $15 billion. Coal-to-liquids plants cost even more. Investments in these plants is highly dependent on the perceived demand.  This factor, in turn, is a function of attractiveness of alternatives such as wind, solar, electrical energy storage, tar sands, coal bed methane, underground coal gasification, shale gas, shale oil, oil shale, small modular nuclear, small scale LNG, advanced coal-fired power plants, etc. All these alternatives are continually assessed in two publications:  Oil, Gas, Shale and Refining Markets and Projects and Fossil and Nuclear Power Generation: World Analysis and Forecast published by the McIlvaine Company. (www.mcilvainecompany.com)

The biggest variable in the mix among these alternatives is coal conversion. The proven coal reserves (defined as presently known and economically minable) is 860 billion tons. This quantity would supply the world at present consumption levels for another 100 years. But coal has a much bigger potential than just this identified resource.  Consider that there is one trillion tons of coal under the North Sea.  Billions of dollars are being invested in underground gasification technology to inject steam and oxygen and extract gas.  CO2 generated in the process would be used to increase yield of shrinking North Sea oil reservoirs.

China is well underway with a program to convert coal to gas, fuels and chemicals at a rate equal to the entire U.S. shale gas program. If the projects in the planning stage are implemented, China will utilize 20 percent of the world’s annual coal consumption just to make gas and liquid products.

The ultimate mix between all these energy sources will be be determined by perception and competition.  In a chess game, the winner does a better job of perceiving the moves of the loser. Among the losers to date are owners of LNG regasification terminals in the U.S.  They did not perceive the moves of shale gas extraction companies. However, if they convert these terminals to export LNG and build others to do so, then power plants which are relying on large quantities of cheap gas will be the losers. So both the quality of the competition and the perception of the opponent are factors in success. Some of the important inputs include:

  • The differential price between diesel and LNG is a critical market factor.
  • Crude represents 65 percent of final fuel price.
  • The disparity between oil and gas prices on an equivalent Btu basis is a function of access.
  • Gas is not economically transported overseas except as LNG, whereas oil is economically transferred.
  • Even if the price of oil drops, the market for gas is not impacted if gas prices also drop proportionately.
  • Until the U.S. has the capability to sell large quantities of LNG offshore, the price disparity will continue.
  • Investors and gas producers are expecting gas in the U.S. to remain at $5/MMBtu.
  • China expects to make gas from coal at less than $5/MMBtu.
  • Shale gas operators are expected to keep expanding as long as oil is above $70/bbl.
  • Oil companies such as Chevron are bullish on increased oil and gas demand and are continuing with high levels of investment.
  • Saudi Arabia is able to increase or decrease output to maintain price levels. Many other producers need price levels above $90 barrel to keep their economies healthy.
  • The oil reserves of Middle East producers are less than 50 years.
  • The Saudi production cost is only $6/bbl.
  • The Saudi oil value is much higher than $100/barrel because it is a resource which is dwindling at 4 percent per year.
  • The result is that the Saudi supply will be adjusted to balance long term value and short term needs.
  • Stranded gas and other sources of LNG where the acquisition price of the gas is negative will be unaffected by oil fluctuations between $80-110 bbl.
  • Safety perceptions of nuclear energy vary widely from country to country.
  • Environmental perceptions including climate change also vary widely between the developed and developing economies.

All these factors will continue to make projections about the production from each of these resources very speculative.

For more information on Oil, Gas, Shale and Refining Markets and Projects, click on: http://home.mcilvainecompany.com/index.php/markets/28-energy/471-n049.

For more information on Fossil and Nuclear Power Generation: World Analysis and Forecast,click on:http://home.mcilvainecompany.com/index.php/markets/2-uncategorised/113-n043

NEWS RELEASE                                                                                                    OCTOBER 2014

Asian Ultrapure Water System Sales to Exceed $3 Billion By 2016

Double-digit annual growth will result in an ultrapure water system and consumables market in Asia which will exceed $3 billion /yr by 2016.  This is the prediction in Ultrapure Water: World Market published by the McIlvaine Company.

Asian growth will exceed the other continents in the following applications:

  • Coal-fired Power
  • Nuclear Power
  • Photovoltaic
  • Flat Panel Displays
  • Memory
  • Semiconductors
  • Pharmaceuticals
  • Bottled Drinks

Asia will spend more for coal-fired ultrapure water systems than ROW combined.  China is building ultra supercritical boilers which require the most expensive ultrapure water systems.  India, Indonesia and other countries in the region are also planning large increases in coal-fired power generation.

Asia is the one region which has significant nuclear activity. Nearly all the photovoltaic manufacturing is taking place in Asia.  The same is true for memory and flat panel displays.  Taiwan has become the leading semiconductor manufacturer with China in pursuit.  All these industries require ultrapure water at each processing step to remove the etching solutions and other chemicals used to form the lines and shapes.

The one area where Asia has not gained much ground is proprietary pharmaceuticals. However, Asia is the selected location for generic pharmaceutical manufacture.  International drug companies are building very substantial research and production facilities in China and India. The growth in generics is higher than proprietary pharmaceuticals.

Asia is also expanding its manufacture of bottled water and other drinks where the source water has to be purified beyond the level of normal drinking water.  This application does not require ultrapure water at the highest level. This is defined as water that has 18 Megohm-cm or greater specific resistance, with other attributes such as bacterial count, TOC (total organic carbon), pyrogen and/or endotoxin, etc.  However, bottled water producers are using purification and monitoring techniques required by the traditional ultrapure water users.

For more information on Ultrapure Water: World Market, click on:http://home.mcilvainecompany.com/index.php/markets/27-water/447-n029-ultrapure-water-world-markets

NEWS RELEASE                                                                                                    OCTOBER 2014

Why More Coal Is Going To Increase the Gas Turbine Market

Europe and the U.S. have been reducing coal burning power capacity and as a result need to increase gas turbine capacity.  But there is one area of the world where increased use of coal rather than decreased use of coal will result in increased gas turbine capacity and increased use of gas for home heating. This counter intuitive program is being tracked in a number of McIlvaine market reports and databases.

One way that increased coal use leads to more gas turbines is in integrated gasification combined cycle plants (IGCC). There is one such plant under construction in the U.S. The Kemper County plant is now projected to cost almost $5.6 billion. Initially the project was estimated to cost $2.4 billion. Start up is now slated for May 2015.

The plant will capture 65 percent of CO2 and deliver 3 million tons of liquid CO2 to oil companies for use in enhanced oil recovery.

This program has been subsidized by the U.S. government. The high cost can be offset where there are enhanced oil recovery opportunities. However, there are not many generation sites which are convenient to oil and gas extraction sites where EOR would be justifiable.

The one area of the world where increased coal will lead to very large increases in gas use is China.  In northern and western China, 700 million tons of coal will be gasified. The gas will then be piped to the big cities. Six hundred thousand coal-fired industrial boilers will be replaced by new gas turbine systems as well as home and residential gas heating units.

The Chinese government has launched a fast track $260 billion program to eliminate the smog in the large cities.  The foundation of this program is clean gas for heating and power.

The magnitude of this effort is demonstrated by a comparison to the U.S. Gas turbine plants in the U.S. deliver power equivalent to coal-fired boilers consuming 400 million tons of coal per year.   The Chinese program will, therefore, generate enough gas to fuel nearly twice the entire U.S. gas turbine capacity.

This program is generating outrage among environmentalists around the world.  But the outrage is failing to have any effect.  The smog problem in the major Chinese cities is causing huge health problems now. The average Shanghai citizen is less concerned about creating a pleasant life for his grandchildren fifty years from now than he is about eliminating the asthma risk for his children this year. He is less interested in the fate of the polar bears than he is in eliminating haze so severe that the sun is not visible.

The economic argument is equally persuasive. Coal gas is estimated to cost as low as $4.50/MMBtu. Imported LNG is $15 /MMBtu.

This attitude is widely shared throughout Asia.  Australia has eliminated the carbon tax and completely reversed its position on global warming. In both Australia and Korea there is considerable movement toward converting coal to LNG.  Posco is building a coal to gas plant to replace the LNG it is now buying on the international market.  India is considering following the Chinese lead.  It has coal reserves but little gas.

More information on these initiatives can be found in:

N043 Fossil and Nuclear Power Generation: World Analysis and Forecast

59EI Gas Turbine and Combined Cycle Supplier Program

N049 Oil, Gas, Shale and Refining Markets and Projects

NEWS RELEASE                                                                                                    OCTOBER 2014

Industrial Scrubber System Revenues to Exceed $8 Billion In 2019

Industrial plants will be spending more than $8 billion annually for scrubber systems by 2019.  This is the conclusion reached by the McIlvaine Company in Scrubber/Adsorber/Biofilter World Markets.

Scrubber Revenues ($ Millions)

Subject

2019

Total

8,050

 Absorber

 3,648  

 Adsorber

 1,563  

 Biofilter

 596

 Dry Scrubber

 651  

 Other

 312  

 Particulate

 1,280

 

These forecasts include applications in the iron and steel, refining, chemical, food, petrochemical, non ferrous metals, pharmaceutical industries to remove particulate and gases from stack discharges. They do not include scrubbers used on coal-fired boilers.  One reason is that the coal-fired boiler market is as large as the scrubber market in all other industries. This market is the subject of another McIlvaine report.

A third market is developing which will also need to be separately evaluated. This is the coal gasification and liquefaction market.  Scrubbers are used in clean up of the gas produced in the indirect gasification processes.  This market is potentially going to be bigger than either the industrial scrubber or power plant scrubber market.

There are less than100,000 MW of power plant scrubbers sold for new and retrofit applications each year. At $100,000-$200,000 MW this is an annual market of $10 billion to $20 billion.  These scrubbers are cleaning up plants which burn 300 million tons of coal per year.

Coal gasification requires even more investment in scrubbers per ton of coal processed. China is planning to convert 1.5 billion tons of coal per year into synfuels and clean gas, fuels and chemicals.  Other nations are also following this path.  Posco in South Korea is installing a coal gasifier in its steel mill and has set up a joint venture to build gasifiers elsewhere.  India and Indonesia have substantial coal reserves and are initiating projects. Australia has canceled its carbon tax and is actively developing underground gasification.  The U.K. could potentially use the underground coal gasification technology to utilize coal reserves in the North Sea.  CO2 could be re-injected into the dwindling oil reserves in the area and, thus, also boost oil output.

With this level of activity it is very likely that the coal gasification scrubber market will be more than $10 billion per year at a peak period a few years from now.

This large market will be temporarily covered in the industrial scrubber market report. More information on this is found at: N008 Scrubber/Adsorber/Biofilter World Markets.

Information on the power plant scrubbers is found at: N027 FGD Market and Strategies

NEWS RELEASE                                                                                                    OCTOBER 2014

Granular Filter Market to Exceed $1.7 Billion Next Year

Sales of granular media filters to purify water will exceed $1.7 billion in 2015.  This is the latest forecast in Liquid Filtration and Media World Markets published by the McIlvaine Company.

Granular Filter Market ($ Millions)

World Region

2015

 Total

 1,749

 Africa

 69

 CIS

 63

 East   Asia

 724

 Eastern   Europe

 37

 Middle   East

 65

 NAFTA

 241

 South   & Central America

 117

 West   Asia

 280

 Western   Europe

 153

 

East Asia will be the largest purchaser due to the investment in drinking and wastewater facilities for the rapidly growing urban populations throughout the region. West Asia will be the second largest regional purchaser with NAFTA close behind.

Granular media filters are the first choice for drinking water plants around the world.  They are also used in wastewater plants.  They are loaded with sand to remove particulate.  They can also be loaded with activated carbon to remove contaminants which affect water taste. There is competition from membrane filtration but granular media filter suppliers have held market share despite the prediction that the more efficient membrane systems would greatly reduce the granular media filter sales.

One of the biggest growth areas is in the purification of water in the oil and gas industry. Conventional onshore oil and gas extraction requires much less filtration than unconventional onshore and offshore extraction.  One of the more challenging applications is aboard offshore oil platforms where space and low maintenance are of prime importance.

Another growing application is for tertiary filtration of wastewater being discharged from municipal treatment plants.  If this water is going to reused by power plants, filtration is required.  Large numbers of power plants are planning to use treated municipal wastewater in the future.

For more information on: Liquid Filtration and Media World Markets, click on: http://home.mcilvainecompany.com/index.php/markets/2-uncategorised/118-n006

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