Before the oil runs out: the search for alternatives

When Adolf Hitler sparked World War II, the German war machine faced a daunting challenge: It had almost no petroleum.

Despite the shortage - which some considered fatal - a powerful Nazi blitzkrieg quickly rolled back the armies of Poland, France, the Low Countries, and Britain, and it thrust far into the Soviet Union. Hundreds of German bombers pounded Britain, and swarms of German fighter planes fought off Allied attackers.

How did Hitler do it? With coal.

Operating 25 synthetic fuel plants, Germans converted their country's brown coal into high-quality diesel fuel and gasoline. Coal provided over 92 percent of Germany's aviation fuel and half of all its petroleum needs.

What worked in wartime Germany could hold lessons for the United States. With only 2 percent of the world's proven oil reserves but teeming with coal, the US could turn its carbon bounty into synthetic fuels. If they're cheap enough, synfuels could power America's autos, trucks, trains, tractors, and aircraft far into the future and cut the nation's reliance on Middle East oil. The US already relies on coal, natural gas, hydropower, and even windmills to heat and provide electricity for homes, offices, and factories. But for transportation - a linchpin of modern economies and national security - synfuels from coal, tar sands, and other ancient fossil deposits represent one of the few alternatives to oil.

"Only fossil fuels provide energy on a large enough scale and with sufficient versatility to meet the world's growing demand for energy," concluded a recent study by ExxonMobil.

Oil and Gas Journal seems to concur. Even as conventional oil supplies begin to play out in the US, the North Sea, and some other major production areas like Venezuela, the Journal says that the most "realistic" replacements would be other "hydrocarbon resources [such as] oil shale, tar sand, extra heavy oil, and possibly coal liquids."

Only hydrocarbon sources like tar sands and coal liquids are in great enough supply to supplement regular oil, the Journal says.

Until now, energy companies have by and large bypassed hydrocarbon alternatives to conventional oil because of cost. Producing oil from something like Canada's vast tar-sand deposits was just too expensive at $30 or $40 a barrel when Saudi Arabia could pump and deliver conventional oil for about $4 a barrel.

Current tight markets and rising prices for oil have changed that equation. Today, there are already a few places with limited but growing production of synfuels. South Africa, for example, has two firms that together produce 200,000 barrels a day of synfuel, mostly from coal, but more recently from natural gas.

Even more ambitious projects are under way in Canada, where private firms such as Royal Dutch Shell are mining and refining tar sands into synfuel that competes directly with conventional oil. Shell plans to more than triple its output from Canadian tar sands to 500,000 barrels a day by 2015, Malcolm Brinded, the company's executive director for exploration and production, said this month.

This is only one of Shell's several efforts to expand oil output from unconventional sources. Mr. Brinded says the company also recently set up a joint venture with a Chinese partner "to explore the possibilities for developing oil-shale resources in Jilin Province."

Among the top candidates to replace conventional oil are:

• Tar sands. The world's largest deposits of this bitumen are in Canada. After billions of dollars of investment by private oil companies, output from the Alberta tar sands has reached 1 million barrels of synthetic oil a day. That should rise to 2 million barrels a day by 2010, and 3 million by 2020. A recent report indicates that costs of producing the oil have declined to $18 a barrel - making tar-sands oil comfortably profitable in today's market.

• Oil shale. Extensive deposits - perhaps 2 trillion barrels of hydrocarbons - lie in America's Rocky Mountain West, mostly in Wyoming, Colorado, and Utah. Difficulties in extracting and refining the hydrocarbon have frustrated earlier efforts. But if oil prices remain at recent levels, oil-shale deposits will become more attractive as conventional deposits in North America play out. Already, the US government has begun to get "expressions of interest" from oil companies about oil-shale deposits on public lands, according to congressional testimony in April by Tom Lonnie, an official with the US Department of the Interior.

• Extra heavy oil. Located in deposits around the world, extra heavy oil, like tar sands, is costly to process, but it could eventually become an important resource. There are hundreds of billions of barrels that could be produced.

• Coal. East and West, the US has plentiful supplies of coal that meet about 20 percent of US energy needs, primarily to generate electricity. Coal is rich in carbon, which provides lots of energy, but it gives off a greenhouse gas, carbon dioxide, that many researchers argue is causing global warming.

All these alternatives to conventional petroleum have serious problems. The hydrocarbons in extra heavy oil and tar sands have been compared to what is left of crude oil after the valuable elements like gasoline and diesel fuel are removed. Heavy oils and tar sands are thought to have once been conventional oils from which the lighter, more valuable elements either evaporated or were washed away by water.

Heavy hydrocarbons are thick, black, and full of contaminants. To make them usable as transportation fuels, they must be cleaned (by removing sulfur, heavy metals, and carbon) and enriched with inputs of hydrogen from another source, such as natural gas. Yet after processing, they make a quality product.

All these alternative hydrocarbons also have a problem with excessive carbon content. Considerable federal research is under way to keep the carbon, which becomes CO2 after it is burned, from reaching the atmosphere. One way is to inject it into the ground, either into oil wells, which increases output of petroleum, or into huge underground formations where it can be stored indefinitely and not damage the environment.

Skeptics abound, especially in places like Parachute, Colo., which saw the 1970s boom in alternative fuels go bust during the 1980s. The small community lost 2,500 jobs after Exxon closed its oil-shale project there in 1982. Today's energy boom is "organized chaos," the town's mayor, John Loschke, told the Associated Press. But "we're better prepared. It's 25 years later and we've got infrastructure."

Environmentalists and conservationists are also wary, because they would prefer greater efforts on renewable sources of energy. But the best-known alternatives, such as wind energy and solar power, are difficult to incorporate into a car or plane and still be commercially feasible.

Nevertheless, inventors and some companies are hard at work on everything from plug-in hybrid cars to engines that run on hydrogen or saw grass (see stories at left and on previous page). It's not clear which of these technologies, if any, will win out.

What looks clear, experts say, is that the continuing growth of demand for gasoline will not come from the West but from developing nations, especially China and India. In fact, oil demand in the US and Europe should begin to decline well before 2030, according to the ExxonMobil study, even while global demand continues to rise about 1.5 percent a year during the same period.

This suggests that developed nations, which inaugurated the oil era 150 years ago and kept it going with imported oil, will pioneer the alternatives as oil begins to run out.

"We have in the pipeline, in 10 to 15 years, a portfolio of [coal] technologies with near-zero emissions," says Scott Klara, deputy director of coal-based projects for the US Department of Energy. "We don't know when oil [output] will peak, but it will peak, and when that time comes, more people than ever will be looking at coal."

• Last of three articles.