R-Squared Energy Blog

Pure Energy

Three Gallons Per Mile

Often when I am flying, I think about the amount of fuel that the airplane is burning. Then when I am off the plane, I usually forget about it. I have heard mixed opinions on the overall efficiency of airline travel versus automobile travel, but just never got around to investigating the matter myself.

Earlier this month I was on a flight from Hawaii to Dallas, and the pilot started talking about some of the plane’s statistics. Paraphrasing, he said: “Today we will be cruising at an altitude of 38,000 feet in this Boeing 757. This aircraft burns about 3 gallons of fuel per mile, and is carrying 243 passengers.” I thought “Hey, I better write that down and figure out later on what my share of the fuel was.”

The distance from Honolulu to Dallas is 3,800 miles. Thus, per the pilot the fuel consumption should have been approximately 11,400 gallons. In the Wiki link to the Boeing 757 article above, the Boeing 757 specifications state that the plane only holds 11,500 gallons, so I think it is likely that we were really getting a bit better than 1/3rd of a mile per gallon.

Divided by 243 passengers, my share of the fuel is 47 gallons. This much fuel carried me 3,800 miles, so my pro-rated fuel economy is 81 miles per gallon. In all likelihood, as I said it was probably a bit better than that since I doubt we were landing in Dallas with only 100 gallons of fuel in reserve.

Of course it is important to note that while the fuel economy looks pretty good, the miles traveled are very high relative to automotive transportation. I generally travel less than 5,000 miles per year with my car, so if I drive a car that gets 25 miles per gallon it would only take about 16,000 miles on an airplane to equate to an entire year’s consumption in my car. I estimate that I have probably flown 300,000 miles in the past two years (which was one of the main reasons I left my last job).

One other item of interest to me is my prorated cost for fuel. At $2.00/gallon, $94 of my ticket price goes toward purchasing fuel, and every $1.00 increase boosts my pro-rated fuel cost by $47 for that Honolulu to Dallas trip. That’s actually surprising to me, as I would have guessed that it would have been more.

But that’s not really what hurts the airlines when fuel prices go up. I think what usually happens is that fewer people fly, and instead of pro-rating my share of the fuel across 243 passengers it may be prorated across only 180 passengers. In that case my share of the fuel rises to almost $200 when jet fuel rises to $3.00 per gallon – and thus a $1.00/gal rise in the cost of fuel translates into a several hundred dollar per ticket price increase.

November 30, 2009 Posted by | airline industry, airplane transportation, fuel efficiency | 44 Comments

Son of Xethanol Goes Bankrupt

I have written several essays on Xethanol over the past few years. If you recall, they were a poster child for the theme of “overpromise, boost your stock price, and get rich quick” on biofuels.

For me, this story dates back to 2006, when an investigative journalist working for Dallas Mavericks’ owner Mark Cuban e-mailed me and asked about the company’s claims. They had announced that thy would “be the first to commercialize cellulosic ethanol” (if I had a nickel for every time I have heard that), and they issued press releases at every opportunity. It worked for a while – at one point their market cap was something like half a billion dollars – despite the fact that there was very little of real value within the company.

Anyway, the investigative journalist published his story (which seems to be offline at the moment), Mark Cuban shorted the stock just before the story was released, and I wrote up something on the company, which I considered to be essentially a scam:

Xethanol Story

Anyway, if you looked into their financials, they were spending money on everything but R&D, while claiming they would be the first to commercialize cellulosic ethanol – which would require a lot of R&D. I continued to follow the story, and predicted in February 2007 that they would eventually go bankrupt:

Xethanol Can’t Deliver on its Promises

Well, about this time last year they went bankrupt – more or less:

Xethanol Now Defunct

I say more or less, because what they did was stop operations as Xethanol, changed their direction, and relaunched as Global Energy Holdings Group Inc. At that point I said I wouldn’t write about Xethanol any more, but there is a final chapter to this saga:

Global Energy Holdings Group Files Chapter 11

Global Energy, formerly known as Xethanol Corp., warned in a recent securities filing that it needed substantial additional capital, but that the credit crunch has made it difficult to sell assets or obtain financing.

Global has had no operating revenue this year and said its sole source of revenue last year was an Iowa ethanol plant that ceased production because of high corn and natural gas prices. The company sold the Iowa plant last week and is also looking for a buyer or partner for a landfill gas project in Georgia.

I do want to make it clear, though, that when Global Energy Holdings Group Inc. was created from the ashes of Xethanol, they did so under new management. Therefore, I don’t attribute the same shenanigans to them as I did Xethanol. As far as I know they were making a legitimate attempt to make a go of it, whereas it appeared to me that Xethanol was just trying to make a fast buck off of very gullible investors. But they were handicapped by previous Xethanol decisions, and the current credit crisis was enough to push them over the edge.

I think that officially closes the book on the Xethanol saga – unless a grandson of Xethanol is born. But with the baggage that comes along with it, I wouldn’t bother reorganizing. If you still want to do business, get a fresh start.

November 27, 2009 Posted by | cellulose, cellulosic ethanol, fraud, Global Energy Holdings Group, scams, Xethanol | 59 Comments

Potential Markets and Benefits from Ocean Thermal Energy

Happy Thanksgiving to those who will celebrate it tomorrow. I plan to spend the long weekend with my family, and probably won’t be on here much.

In the interim, two things. First is that it is about time to start thinking about the top energy stories of the year. As in year’s past, I would like reader’s opinions on the top energy-related stories of 2009. I will put up a post late in December with the ones that I think are most significant.

Second, I present a guest post by Dr. Robert Cohen on ocean thermal energy conversion (OTEC). Dr. Cohen has been an advocate of OTEC for many years, and has posted a guest essay here previously:

Ocean Thermal Energy Conversion

There were some useful comments following that essay that I think explain the challenges for OTEC. Dr. Cohen has a website where he addresses OTEC in more detail, and his contact information is also available there.

—————————

POTENTIAL MARKETS & BENEFITS OF OCEAN THERMAL ENERGY

Robert Cohen, November 24, 2009

Once the Obama Administration and the Congress put ocean thermal R&D back on a fast track, one that leads to the maturation of this technology within a few years, ocean thermal energy can foreseeably provide baseload electricity to energize at least three major geographic markets (see the ocean thermal resource map on the next page) in the following time-frames:

1) An early market to displace the use of oil, oil that is presently being burned to generate electricity in places like Hawaii, Puerto Rico, and in many developing countries. Places that are relatively accessible to the ocean thermal resource. Years ago we estimated that that early market could utilize about 50,000 MWe, which amount would achieve an oil savings of 2 million BBL/day [calculated @ 40 BBL/day per 1 MWe of ocean thermal].

2) A near-term market for electricity generated (for example) in the Gulf of Mexico and delivered via submarine cable to the U.S. electrical grid at points on the U.S. Gulf Coast, such as Key West, Tampa, New Orleans, and Brownsville. This source of baseload electricity could substantially implement the priority strategies advocated by Al Gore and T. Boone Pickens, which are aimed at providing renewable energy for propelling vehicles.

3) A potentially vast longer-term market for products derived from electricity generated aboard a fleet of ocean thermal plantships grazing on the high seas. Those plantships would convert the baseload electricity (plus air and water) to energy-intensive products such as hydrogen or ammonia, which could be shipped as energy carriers or as final products. For example, ammonia could be used as a hydrogen-carrier, combustion fuel, or for fertilizer.

Note that achieving the third option would mean that energy and energy-products could be shipped to the USA from domestically-owned ocean thermal plantships at locations that are in many cases closer to our shores than are many of our (often hostile) foreign sources of imported oil.

A global map of the OTEC Thermal Resource to supply energy to the above markets

This map shows contours of annual average temperature differences, in degrees Celsius, available in the world’s major oceans between surface waters and the cold water at 1000 meters depth that serves as a heat sink. The most desirable regions (bounded by the areas in yellow) are where that parameter equals or exceeds 20 degrees Celsius.

Energy FROM the oceans, to replace energy from ACROSS the oceans!

November 25, 2009 Posted by | geothermal, ocean thermal energy conversion, reader submission | 31 Comments

Catching Up

Back home now, just trying to catch up on the energy news of note. Four stories that I want to highlight. First was POET’s announcement on their progress on cellulosic ethanol:

Poet hits ‘long shot,’ cuts cellulosic ethanol costs

WASHINGTON – The head of the world’s largest ethanol producer, Sioux Falls-based Poet, said Wednesday that his company has drastically cut its cellulosic ethanol production costs.

It is a breakthrough that will allow cellulosic ethanol to compete with gasoline within two years.

Jeff Broin, Poet chief executive, told reporters during a roundtable discussion that the company has reduced its cellulosic ethanol production cost during the past year from $4.13 a gallon to $2.35 a gallon.

Andrew Leonard of Salon asked me for some comments, which he included in a story on the news:


Who cares about peak oil when you have corn cobs?

In addition to what made it into the story (and those comments were specifically about the kinds of risk factors POET faces), I said that I thought the guys at POET had done a nice job on this (that comment did make it into the follow-up story at Salon). One thing that isn’t clear to me is whether the production cost includes any capital recovery. If not, then they still have some distance to go to get that $2.35 into an economic range with ethanol presently trading at about $2.00 a gallon. [Edit: A comment from Nathan Schock of POET over at Green Car Congress indicates that this is in fact the total production cost – including depreciation]. Another question I would have is how their version of the process performs with other sources of biomass.

One other thing I said to Andrew (that didn’t make it into the story) is the really big challenge is in getting those ethanol titers up. Low titers mean lots of energy is spent in getting the water out. This is why I have always favored gasification technologies over hydrolysis technologies: You don’t have water to deal with, and thus the BTU efficiency is potentially going to be higher. (Probably your capital costs as well will be higher for gasification – depending on what you are producing from the syngas). If biomass costs rise in the future – as I expect them to – then there will be added incentive for maximizing BTU efficiency.

The second story was sent by a reader. In light of the amount of corn we produce, this could have significant ramifications:

Amaizing: Corn Genome Decoded

A team of scientists led by The Genome Center at Washington University School of Medicine in St. Louis published the completed corn genome in the Nov. 20 journal Science, an accomplishment that will speed efforts to develop better crop varieties to meet the world’s growing demands for food, livestock feed and fuel.

The United States is the world’s top corn grower, producing 44 percent of the global crop. In 2009, U.S. farmers are expected to produce nearly 13 billion bushels of corn, according to the U.S. Department of Agriculture.

The next story is about a trend that I think will continue. In my presentation in Orlando, one of the trends that I pointed out is that more refineries are being built closer to the source of the oil. Saudi produces crude, but would like to capture more of that value chain by refining it as well. There are a number of very large refinery projects underway – especially in Asia and the Middle East – and in a world with stagnant oil production that means some refineries are going to shut down. In the U.S., our refining capacity is more than three times greater than our oil production rates. I see a dismal outlook for refining in the U.S., with a lot of refiners going out of business in the U.S. Valero just announced another refinery closing:

Valero refinery in Delaware City to close permanently

DELAWARE CITY, Del. — Valero Energy said this morning it plans to permanently close its Delaware City Refinery, eliminating hundreds of high-paying jobs, because of weak economic conditions, high local costs and chronic troubles at the 210,000 barrel-per-day complex.

Company spokesman Bill Day said that a plantwide maintenance shutdown, announced late last month, was already under way, and will convert to a final closing. Plant employees will continue on the payroll for 60 days under federal rules for large-scale layoffs.

Day said the plant — which produces about 70 percent of the gasoline sold on the Delmarva Peninsula— has lost $1 million a day since the start of 2009.

About 550 full time workers will be put out of work by the decision. Valero (VLO) also has notified companies that work closely with the refinery, Day said, but effects on those operations were not immediately available.

People forget that refining is a very tough business. They remember when refiners make money – as they were doing a couple of years ago – but forget that most of the time they aren’t making money. Plus, when they do make money they are subjected to accusations of gouging and calls from politicians to tax their windfall.

Finally, readers know that I have consistently avoided wading into the debate over global warming. It takes enough of my time just trying to keep up with the latest energy news, and I decided long ago to sit out the debate on climate change. It is far too politicized and people get too emotional over the issue. However, I do think it is important that the debate takes place, and I don’t like to see people trying to shut it down. Attaching labels like “denier” to people who question the science is an attempt to shut down debate, and I don’t care how right you think you are – in my view the debate needs to go on.

A couple of days ago it was announced that some e-mails from a climate research outfit in England had been hacked:

Global Warming Research Exposed After Hack

A climate change dust-up

I have to say that some of the e-mails I have seen posted are troubling. Whatever history ultimately shows, some of those e-mails appear to be agenda-driven and not science-driven. There is no place for that.

Let the debate carry on, and let science – not agendas – determine the outcome.

November 22, 2009 Posted by | cellulosic ethanol, genetic engineering, global warming, greenhouse gases, oil refineries, POET, refining, Salon, valero | 118 Comments

CNN on The Long Recession

One of the themes I have been hitting during my recent presentations concerns the oil price risk hanging over our heads. My hypothesis goes something like this. The days of huge supply excesses in the oil production world are over. Those 5 million barrel per day supply cushions of 10 years ago kept oil prices low, and fairly stable. As the excesses shrank we began to see increasing volatility and prices steadily climbing. Higher oil prices have historically caused recessions. We are currently in a recession, albeit one in which high oil prices weren’t the primary cause. (More on that at the end).

But, oil supplies were already tight prior to the recession. The recession has lowered demand, and at the moment we find that we again have a fair excess of oil production capacity. As global economies strengthen, that increases the demand for oil. One of the things I have been pointing out in my presentations is that U.S. oil demand dropped by 1.2 million bpd over the past four years, but demand in India and China increased by 1.9 million bpd over that time period.

Therefore, it won’t take long for the capacity cushion to shrink and for oil prices to spike up again, putting us back at risk for recession. This was the basis for my essay The Long Recession – and I think it helps explain why oil is back up to $80. This is going to make for a long recession, and one in which the attempts to recover will trigger the higher oil prices that tend to bring on recession in the first place. It is a merry-go-round that we need to get off of, but it won’t be easy.

CNN has a story out today that covers this theme:

Forget $100 oil. $80 oil is a problem

NEW YORK (Fortune) — Are cash-strapped American consumers on for another date with energy price misery?

The U.S. economy remains weak and one in six Americans can’t find enough work. Yet oil prices have risen steadily this year. A barrel of crude costs $79 and change, more than double its price at the end of 2008.

That could complicate recovery in an economy that, despite the tumult of the past two years, remains as consumer-driven as ever.

I think “complicate recovery” is putting it mildly. We have to recognize the economic danger posed by being so dependent upon something that has the potential to swiftly bring the economy to its knees – and that is also in high demand by countries like India and China.

The story also points to the role oil prices played in bringing on the recession:

And though it’s futile to single out any one trigger for the recession that started at the end of 2007, the downturn didn’t start in earnest until consumers’ energy budgets breached the 6% mark in November that year.

As energy prices soared and incomes came under pressure, Americans first stopped buying pickup trucks and then deserted the local car dealer altogether. Car sales plunged in the spring of 2008 before falling off a cliff with the collapse of Lehman Brothers that September.

“The price of oil played a bigger factor in the recession than people seem to be remembering,” Hamilton said.

I would argue that the U.S. would have been pushed into recession eventually even without the subprime mortgage crisis. There are also a number of people who would argue that high oil prices led directly to the recession; that it was oil prices stretching family budgets which led to people not being able to pay their mortgages. Regardless of which theory is true, it is a historical fact that spiking oil prices have caused economic slowdowns, and over the past year oil prices have doubled. It is tough to see an easy way out.

In closing, I am still traveling for a couple more days (writing this from a small library in Oklahoma), and as I mentioned in the previous post I am about to miss my wife’s birthday for the 4th year in a row. So I want to wish her a Happy Birthday tomorrow, and at least this year I will be home only one day late. Plus, I will be arriving in Hawaii with our two Miniature Schnauzers that we had to leave behind when we moved to Hawaii. She doesn’t feel too bad about me missing her birthday, because the reason is that I had to take a detour to Texas to pick up the dogs. So, she is going to be reunited with “the pups” after three months apart (this is a result of Hawaii’s tight restrictions on importing pets) – and I think she feels that’s a great birthday present. At least I hope she does, because I didn’t get her anything else. Now that I think about it, I should go shopping…

November 18, 2009 Posted by | economics, oil prices, recession | 79 Comments

Slides from the Pacific Rim Summit

I am hopping on a plane again today, this time bound for the Orlando Energy Conference. The topic I will present is An Overview of Global Energy Issues. Good thing they asked for something easy and non-controversial. 🙂

This is the last trip I have scheduled for this year, and I am hoping not to have to travel again for a while. Following Orlando, I will spend a few days at the family farm in Oklahoma, where Internet access has yet to make an appearance. Therefore, I will be slow to return e-mails and respond to comments. If all goes according to plan I will be back in Hawaii on November 21st (after having missed my wife’s birthday for the 4th consecutive year).

I quite enjoyed the presentations at the Pacific Rim Summit. I got to talk to a lot of people about what they were doing, and I got to hear the latest from the algae and cellulosic ethanol camps. With the exception of the guys doing algae fermentations, the mood wasn’t great as the challenges of turning cellulose into ethanol and algae into fuel start to manifest themselves. Like I have said before, we have been trying to commercially make ethanol from cellulose for 100 years. There were multiple panels going on simultaneously, though, and I didn’t get to see all of them. Maybe the news in some of the other panels was better.

Then there is Joule Biotechnologies. They gave one of the talks at lunch one day. To say people are skeptical is an understatement. I don’t really know what to make of them. I can’t find enough information yet to give them a really thorough critique, but I am not a big fan of issuing press releases following lab tests. Note that they haven’t yet advanced to pilot scale (that comment came out during the talk – that they were moving toward piloting), and they are already making pretty bold claims about yield, cost, and solving the energy crisis. Personally, I think I would wait to see how these things scale. As one cellulosic ethanol executive commented this past week, “These things don’t scale like you think they should.” That’s right, they don’t. That’s why most technologies don’t make it out of the lab. Always better to make conservative claims and then deliver beyond expectations than to make wild claims and fall short.

Anyway, here are the slides I presented at the Pacific Rim Summit. There is some overlap with what I presented at the First Nations’ Futures Program at Stanford University on September 27th, but there are a number of new slides there.

At some point I will probably write some posts around the theme of these slides, throwing in my notes pages to put the slides in context. To put these slides in some sort of context, here were three of the slides and the notes I had jotted down for them. From the Outline slide:

We have talked a lot about sustainability this week. I must have heard that word a few dozen times the past couple of days. So who in here lives sustainably? We don’t, and our parents didn’t. Some of our grandparents may have, but for the most part they didn’t either. As a society, it has been a very long time since we lived sustainably.

So, why is it important then? I once had a friend say “There really is no need to worry too much about sustainability. Mother Nature will ultimately resolve the problem.” The problem with that statement is that I might not like how Mother Nature solves the problem. Hence, it is important to move toward sustainability voluntarily.

From the Coming to Grips slide:

I am presently reading Big Coal by Jeff Goodell. Jeff opens with a comment that I think captures the nature of the problem we face. When we go to the gas station or turn on a light switch, we don’t have to face the consequences of our dependence – the externalities. The consequences are there nonetheless, as Pat Gruber of Gevo noted yesterday when he said “There’s mercury in our fish, and I don’t like that.”

Our actions have consequences. Who said that? My oldest son can tell you. He hears that all the time, because he doesn’t always connect the fact that when he takes certain actions, sometimes there are bad consequences. The difference between him and the person filling up with gas is he does get to face them immediately.

I also don’t know who said that last one – Deal with reality or reality will deal with you – but again it’s like something I tell my kids. The future is coming whether you plan for it or not. If you plan for it, you tilt the odds in your favor.

From the slide My Paradigm:

We all view the world through a set of lenses. These are my lenses, and they shape my opinions. I know where we are, but I want to know where we are going to be in 3 , 5, 20 years from now. I believe that we will end up paying a lot more for oil than we do now. I often point out to people that consumers in Europe pay the equivalent of $250/bbl for oil. Thus, I believe the technologies will need to compete against a higher future oil price.

We are burning fossil fuels at an unsustainable rate, and we have gotten away with it for a century. We won’t get away with it for another century.

As competition for biomass heats up, low-cost biomass is going to vanish. If your business model is based on tipping fees, then I don’t believe that’s a sustainable model. Jim Imbler from Zeachem commented yesterday that Macdonald’s in San Francisco used to pay to have their waste grease hauled off. A lot of people starting making their own biodiesel, and now not only does MacDonald’s charge for the grease, but the mob is stealing it. That’s my long-term view of biomass, and that theme has been repeated all week. You better lock in your feedstock. You don’t have the same luxury as an oil company to switch to a supplier halfway around the world. The energy density of biomass makes that proposition problematic.

Finally, those “renewable” solutions that are heavily dependent upon fossil fuels won’t compete. More on that later.

Anyway, off to the airport now. Probably no new posts from me for a week.

November 14, 2009 Posted by | algae, algal biodiesel, cellulosic ethanol, gevo, presentations, zeachem | 46 Comments

Book Review: Oil on the Brain

Oil on the Brain: Petroleum's Long, Strange Trip to Your Tank by Lisa Margonelli

Oil on the Brain by Lisa Margonelli was recommended by Paul Sankey at the 2009 Energy Information Administration Conference as a book that provided great insight into the oil industry. I have had it on my list of books to read, and recently picked it up to read during my travels. I have been traveling a lot lately, and I like to read while I travel, so I knocked it out over the past couple of trips I have taken.

The premise of the book is that a person who doesn’t know much about the oil industry sets out to find out what it is really like on the inside. It reminded me in some ways of Crude World by Peter Maass (which I reviewed here). The biggest difference is that Margonelli was approaching the subject from a pretty basic starting point, and Maass had written quite a bit about the industry when he tackled Crude World.

I guess I never cease to be amazed by what people think the oil industry is like, and what it is really like. People seem to think that the oil industry is a bunch of guys in a smoke-filled room who conspire to set prices. To be honest, that’s probably the way I viewed the industry when I was growing up. And still, my first reaction to my cable bill going up is “Those greedy cable companies are ripping me off.” The big difference with the cable companies, though, is that their profits aren’t thrust in everyone’s faces at the end of every quarter. Every time oil prices do spike up and oil companies show nice profits, people do feel like they have been taken advantage of. But I digress a bit.

For this book, Margonelli embedded herself within various sectors of the oil industry. She spent time throughout the supply chain, hanging out at a gas station in California where she found that the owners made more money on candy and soda than they did on gasoline. She spent a day with a tanker truck driver and his dispatcher, and spent time in a refinery and on an oil rig. She even got inside the Strategic Petroleum Reserve, which is typically off limits to visitors. She traveled abroad to Chad, Venezuela, Nigeria, and even Iran to understand the world of oil and what is has meant to these regions.

Here were what I thought were some of Margonelli’s more interesting observations. She spoke a lot about the indirect costs of using oil. In talking about oil spills, she mentioned that her view of an oil spill had always been dominated by the Exxon Valdez. She had never connected these spills to her own fuel usage, but learned that drivers and boaters spill more oil every year than did the Exxon Valdez. The number she cited was 19 million gallons of oil products spilled each year in our waterways by boaters and auto drivers.

She wrote about the notion that oil companies are in a conspiracy to set prices. A jobber she spoke with – someone who has to buy fuel from the oil companies – said “There are eleven studies which show there isn’t a conspiracy. Chevron, Shell, Exxon – they hate each other. It’s like war daily. For them to collude is insanity, but people believe what they want to believe.”

On that topic, she noted an episode of hypocrisy displayed by Nancy Pelosi. One day in 2006 Pelosi told a group of school children that we hadn’t done enough to reduce our dependence on gasoline, and so demand was high and that’s why the price was high. Then she got in front of the cameras and she cited the conspiracy of big oil and the Republicans working for their interests. But as Margonelli noted, “the myth of conspiracy overwhelms reason, particularly when pump prices and oil company profits are high.” I think the lesson there is “If the talking point is working, keep pushing it.”

She met an old-time wildcatter named Michel Halbouty (now deceased) who complained that the country has not had a coherent energy policy in 30 years. He advocated more promotion of domestic energy exploration, and fears a slow slide into deindustrialization. He noted that the main problem is that “People. Don’t. Care.” As long as they can pull in and fill up, they just don’t care about energy policy.

In China, she met with someone within the government who was involved with energy policy. He noted that it would be a disaster for China to move toward an American way of life, but he says that cars are clearly there to stay in China. On GDP, Margonelli wrote that China requires 4 or 5 times as much energy as Japan per point of GDP. Finally, the minister commented that China needs “a bigger space to survive under U.S. hegemony.” On that point, she also spoke with a European analyst who said that U.S. hegemony is a part of China’s strategy; that if they can get the U.S. to bear the expense of maintaining the energy status quo, they will have the time and resources to retool their economy.

In the epilogue, Margonelli comments that there is no such thing as cheap gas; that there are hidden costs throughout the supply chain. But the population has come to expect cheap gas as a “grand bargain” with the government and the oil companies. When the price goes high, they look to the government to punish the oil companies so prices will come back down.

One weakness in the book is that it really didn’t address the question of depletion. It seemed to take at face value that oil will continue to be available and business will continue as normal for decades. However, I note that Margonelli was at the ASPO Conference this year (along with Peter Maas; I am sorry I missed that) so she got a heavy dose of peak oil information. Some very interesting comments by her can be found at this story covering the conference.

As one might expect, Margonelli emerged from her experience with a radically different view of how the oil industry works. I have to agree with Paul Sankey’s assessment that it does provide great insight into the industry, from a very basic starting point and with a balanced view. As one reviewer pointed out, it could have been titled “The Petro-economy for Dummies”, which is to say it is a book that is easily understood by those with zero knowledge of the industry. This book would be on my short list of books to recommend to people who want to know what the industry is really like.

November 13, 2009 Posted by | book review, China, energy policy, ExxonMobil, Lisa Margonelli, peter maass, Shell | 31 Comments

Algal Tidbits from the Pacific Rim Summit

My presentation is tomorrow, but I have sat through some very interesting presentations over the past couple of days here at the Pacific Rim Summit on Industrial Biotechnology and Bioenergy. They have five panels going at once, but I have been sitting in on the cellulosic ethanol, algal fuel, and biomass logistics sessions for the most part. They will have links up to the presentations at some point, but I have been taking a lot of notes (12 pages of notes so far!)

On algae, these were some of the more pessimistic comments from various presenters, some of whom are executives at algae companies:

“Algae carries a great deal of technical risk.”

Asked about expected cost of algal oil: “I don’t know, because we don’t have any plants.”

“Photobioreactors (PBRs) are not a smart way to make algal fuel.”

“To scrub the emissions from a coal-fired power plant would require 35,000 acres of PBRs at a cost of $5 million per acre. But we might be able to get that down to $1 million per acre.”

“I calculate that it will take 36,000 acres of PBRs to scrub a power plant. The bottom line for those who would propose to use algae in this way? Abandon all hope.” – comment from the next presenter

“ExxonMobil is investing in algae but they said it would take 10 years to figure out if it was going to work.”

“Based on the absolute maximum solar capture at the equator, the theoretical maximum production of algal oil at the equator is 17,486 gallons per acre per year. The reality in Honolulu is about 833 gallons per acre per year. The energy balance – even with very optimistic assumptions and not including all of the unit operations – is well below 1.7 units out per unit in.”

“25 gallons of water is consumed per gallon of algal oil produced.”

“Algal oils are not economically viable.”

Now in fairness, these were comments of various presenters and some of the audience members took exception to some of the comments. One person commented that the water usage from corn ethanol when the corn has to be irrigated is much higher. Someone else pointed out that these comments did not apply to the fermentation approaches.

Incidentally, as a science project my oldest son is growing Spirulina at home under different conditions. We are also attempting to extract oil from some Haematococcus samples that we have. As a science project, I think this is fine (although it is more difficult than you might imagine). But nobody here seems to be too optimistic about algal fuels in either open ponds or PBRs anytime soon. I think the jury is still out on the fermentation approaches such as what Solazyme is working on.

November 11, 2009 Posted by | algae, algal biodiesel | 8 Comments

These Engineers Still Need Jobs

Once again, I am asking for help in placing some of my former engineers who lost jobs in July. As you know, this is a difficult job market across most sectors. Unemployment numbers were released today, and the unemployment rate went over 10% for the first time since 1983.

A number of stories have noted the grim statistics:

College Graduates Face Toughest Job Market in Years

According to a survey from National Association of Colleges and Employers, the class of 2009 is leaving campus with fewer jobs in hand than their 2008 counterparts. The group’s 2009 Student Survey found that just 19.7 percent of 2009 graduates who applied for a job actually have one.

In comparison, 51 percent of those graduating in 2007 and 26 percent of those graduating in 2008 who had applied for a job had one in hand by the time of graduation.

College graduates face a tough road ahead

The unemployment rate for 20- to 24-year-olds has topped 14 percent for the first time in more than 25 years. With the notable engineering exceptions, starting salary offers have fallen by 3.1 percent compared with last year, according to CollegeJobBank.com.

Small wonder about 1 in 4 of this year’s grads plans on graduate school instead of getting a job.

During my career, engineers have always had an easy time finding jobs. And that last story implies that the job market is still OK for engineers. That has not been my observation. As I reported back in July, my previous company had to let go of a number of engineers. In fact, one of my last tasks was to sit down with most of these engineers and tell them that they no longer had jobs. It was the hardest thing I have ever done in my career. The fact that all of these engineers were doing a great job for us made it much more difficult. Here it is over 3 months later, and these engineers are still looking for jobs. While a couple of them have significant experience, the problem for the others is that they have less than 3 years of experience. It seems that everyone looking for engineers is looking for more than 5 years of experience.

So in the hopes that someone out there needs some good engineers, I want to highlight them once again and link to their resumes. The last time I did this I asked people to e-mail me for their information, and that caused an unnecessary bottleneck. This time you can click on their resumes and contact them directly. As always, I am happy to get on the phone and talk to you about any of these engineers. They are all top-notch, and someone should be utilizing their skills.

Here is a brief description of each, followed by a link to their resume. (Please be forgiving on any small formatting issues, as there are some formatting changes when these get converted from Word into Google Documents).

1. First year chemical engineer out of Arizona State with a 3.6 GPA. Spent 8 years in the U.S. Army. Gets along very well with everyone, and established himself very quickly as a promising engineer in our Arnhem (Netherlands) plant. Ideally would like to work in chemicals/petrochemical or energy. Resume link.

2. MS in Chemical Engineering from Princeton, with a BChE Summa cum Laude from the University of Delaware. Was excellent in an R&D role for us. Interests are process design and improvement in the chemical, biochemical, pharmaceutical, or energy industries. Willing to relocate within US and Canada. Preferences within the following areas: Mid-Atlantic, New England, Pacific Northwest. Resume link.

3. Chemical engineering graduate from Villanova. Enormous potential, but had barely started with us when the reorganization was announced. The all around best of a very good group of candidates I interviewed from the recent graduating Class of 2009. Some experience in pharmaceutical quality control, product development, process optimization, and coal gasification. Would prefer to stay in the PA, NJ, NY, DC, MD, or VA area, but open to other areas for the right career development opportunities. Resume link.

4. Mechanical engineer by training with a substantial blend of operations management and process improvement experience. Has been successful in roles such as Six Sigma Black Belt, Manufacturing Manager, Plant Manager, and Global Process Improvement Manager. Ideal role would be as Operations Director or Director of Process Improvement. Resume link.

5. Ph.D. chemical engineer with more than 20 years of experience, 32 granted patents, and numerous publications. Former professor at a major U.S. university. Has a combination of industry and academic experience. Resume link.

November 7, 2009 Posted by | Accsys Technologies, employment, Titan Wood | 13 Comments

Merica Acquires Majority Stake in Choren

Today it was announced that my new company, Merica International, has acquired Shell’s stake in Choren Industries. This is something we have been actively pursuing for some time. This transaction gives Merica a great deal more flexibility than we had previously.

The primary reason for the acquisition is that it gives us freedom to pursue the projects we want to pursue. While I have the greatest respect for Shell, our interests obviously would not always align with theirs. We are first and foremost a bioenergy company, and that is not their core business.

Further, if Choren wanted to make any major capital expenditures, it hinged on getting Shell’s agreement. As Shell is in a major cost-cutting mode, a lot of the projects we want to pursue could have been potentially impacted. Shell Fischer-Tropsch technology will still be used in Choren’s Freiberg BTL facility, but future decision-making will be simplified.

Here are excerpts of the story from Reuters:

Shell sells stake in German biofuel firm Choren

HAMBURG, Nov 5 (Reuters) – Oil major Royal Dutch Shell has sold its shareholding in German second-generation biofuels company Choren, Choren said on Thursday.

Choren is building Germany’s first biofuels plant using new generations of non-food raw materials as feedstock and is likely to start initial commercial production in 2010.

Shell had sold its minority shareholding to other shareholders which comprise German vehicles groups Volkswagen and Daimler plus a consortium of investors largely from the Hamburg region, Choren said in a statement.

Merica is within that “consortium of investors”, and is in fact the majority shareholder of the company now.

November 6, 2009 Posted by | btl, Choren, Merica, Shell | 16 Comments