Refinery Closures

Refinery Closures

Australia used to refine all the oil we consumed ourselves.  Of the eight refineries that performed that task, the first closed in 2003 and it has been recently followed by three more to leave four – one in Queensland, none in the biggest market of New South Wales, two in Victoria and one in Western Australia.

The consequences of those refinery closures have started in that fuel supply is being disrupted.  In late January 2014, there was a shortage of jet fuel at Tullamarine airport because a cargo of fuel had been delayed.  The refiners and marketers don’t want to tie up a lot of capital in their business and tend to live a hand-to-mouth existence with just-in-time scheduling.  Previously there had been a shortage in rural Western Australia due to a bad batch of imported diesel. In Victoria in 2012, there had been a shortage of diesel due to simultaneous outages of the two Victorian refineries.  As the National Farmers’ Federation submission to the inquiry noted, a diesel shortage at harvest could be disastrous.

Figure 7 following shows what the evolution of Australia’s refining industry looks like:

Figure 7:  Australian Refining Capacity 2000 – 2020 Relative To Consumption

Figure 7: Australian Refining Capacity 2000 – 2020 Relative To Consumption

 

Figure 8: Energy Density of Transport Fuels
Figure 8: Energy Density of Transport Fuels

Figure 8 shows the energy density of transport fuels relative to volume. Energy density corresponds to the number of carbon atoms in each hydrocarbon type. Diesel has the highest energy density and is made of hydrocarbon molecules with between 10 and 20 carbon atoms in each molecule. Petrol has five to ten carbon atoms in its molecules. Jet fuel (not shown) has 10 to 14 carbon atoms. LPG is made of propane and butane with three and four carbon atoms respectively. Ethanol has a low energy density due to the oxygen atom in its molecule.

Ethanol is also a poor fuel. With it having only 65 per cent of the energy density of petrol, pure petrol will take a vehicle 50 percent farther than the amount of ethanol that takes up the same space in the fuel tank.   Ethanol also has an enormous affinity for water, which it absorbs from the air above the fuel in the tank. Once the ethanol has become super-saturated with water, the ethanol-plus-water mix separates from the petrol at the bottom of the tank and can cause engine trouble. In the Australian environment, ethanol may take more energy to make than the energy it contains.

LNG has a relatively high energy density but requires storage at -160ºC. In storage, methane is constantly boiling off and must be used or it will be wasted. Thus LNG is really only suitable for large vehicles that are in constant use. As such it will have limited market penetration. There is also no storage in the LNG production system with gas going from the wellhead through to the LNG plant in a continuous process. Once LNG is produced, it will require ongoing refrigeration in expensive tankage.

Coal is being used to produce synthetic natural gas (SNG) in South Korea and China. The first plant of this type was built in 1984 in Beulah, North Dakota. The implication of the new South Korean and Chinese SNG plants is that methane is no longer a cheap energy source. If you are going to produce methane from coal you might as well produce liquid transport fuels with only a little more effort.

Another consideration with natural gas is that Australia’s major gas fields are highly exposed off the coast of Western Australia. As such they are highly vulnerable to anti-ship cruise missiles, which today have ranges up to 1,500 km. It would be ill-advised to rely upon natural gas supply from offshore gas fields, and associated condensate and LPGs, in a conflict.

Compressed natural gas (CNG) has high penetrations of 70% in the small vehicle fleets of Iran and Pakistan due to government mandates there. As a fuel it suffers from low fuel density and low transfer rates. Reticulated gas at low pressure has to be pumped up to the pressure in the vehicle’s fuel tank. Due to the presence on the east coast of Australia of LNG plants that are short of their long term supply requirement, those plants will have the effect of making east coast gas trade at near parity with the oil price, which is now the driver of the LNG price in the Asian region. So reliance upon CNG will involve a lot of inconvenience, minimal storage ability and pricing near that of traditional oil products. Its mandated use in the Australian economy would result in an impairment of economy activity.

Despite their high energy density for a battery, lithium ion batteries constitute 20% of the weight of a commuter vehicle which means that 20% of the energy is used for carting the battery around. In the absence of nuclear energy, the ultimate source of the electric power for electric vehicles is either natural gas burnt in gas turbines or coal burnt in power stations. Natural gas is already a suitable vehicle fuel almost straight from the wellhead. Burning it in a gas turbine leaves you with 40% of the contained energy. In Australia, transmission losses take 10% of what is left and charging losses take another 10%, leaving about 30% of the original energy in the natural gas to drive the wheels. This compares to 50% of the original energy if the natural gas had been used in a CNG vehicle. Thus electric vehicles waste 40% of the available energy of the in the natural gas if it was used in vehicles directly. All the growth in the power market on the east coast of Australia has been gas turbines burning natural gas. As well as all that, CNG vehicles have a much longer range than electric vehicles. The range of CNG vehicles can also be extended using petrol tanks as they are dual-fuel.

With respect to burning coal in power stations to charge electric vehicles relative to turning coal into liquid fuels using the CTL route, the proportion of the original energy in the coal that gets to the wheels is much the same. The CTL route has far greater range and storage though. A tank of diesel will take a vehicle 50 times further than the same volume of lithium ion battery. Diesel can be stored indefinitely at any scale whereas electric power has to be used the instant it is created. Electric vehicles might be appropriate if the electric power source was from nuclear energy. Even then, using electric power to make liquid transport fuels may be a better proposition.