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Source: ZE

I love clean diesel cars. I enjoy hitting upwards of 950km per diesel tank and knowing that I can cover larger distances with a smaller amount of emissions. Given the choice, this is normally where my vehicle-purchasing choices lie. And, based on data from R.L. Polk and Co, clean diesel car registrations in the U.S. are increasing with a 24.3% jump from 2010-12 (DieselForum.org) – so, it looks like those that agree with me are rising in number.

Admittedly, only 3% of all vehicle registrations in the United States are currently for diesel vehicles; however, according to the Executive Director of the Diesel Technology Forum Allen Schaeffer, diesel sales could “reach 10% of the U.S. market by 2020” (DieselForum.org).

Synthetic diesel (different from biodiesel fuel, which is produced from biological fats) is produced from the reconfiguration of hydrocarbons, most often taken from natural gas through the gas-to-liquid (GTL) process, also known as the Fischer-Tropsch process (BanksPower.com). With the advent of a new synthetic diesel-producing technology by Calgary-based Expander Energy Inc., it looks like synthetic diesel production also could be on the rise in the United States, Canada, and other locations flush with not only liquid natural gas (LNG) but also oil sands processors.

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Figure 1: Top 10 states with the most number of diesel passenger vehicles (Cars, SUVs, Pickup Trucks, and Vans) in 2012, Source: Dieselforum.org/top10

Expander created a technology called FTCrude that converts the waste emissions from oil sands processing plants into synthetic diesel in order to “clean up Canada’s massive oil sands rather than cede the field to energy alternatives” (Financial Post). Expander’s technology “increases output by taking carbon-rich refinery waste, gasifying it, and incorporating natural gas to create synthetic diesel, naphtha, and other oil products” (Financial Post). According to Expander CEO Jim Ross, “the bottom line is a minimum 50% reduction in CO2, and we think we can see a reduction of as much as 80%.”

As diesel fuel is mostly used in the transportation industry (including large trucks, airplanes, trains, and consumer cars and pickups), finding new ways to produce this fuel is paramount to this industry’s successful future – and creating ultra-low sulfur diesel (ULSD) from the previous waste in the oil processing system could be the economically sound decision to propel this industry further.

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Figure 2: NYMEX ULSD Futures prices from 2010-12.

The price of ultra-low-sulfur diesel has gone up significantly in the last three years. This graph was generated in ZEMA using NYMEX New York Harbor and Gulf Coast ULSD Futures data. NYMEX New York Harbor ULSD Futures are used as a global benchmark for middle distillates (kerosene and diesel).

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Figure 3: NYMEX RBOB Gasoline Financial Futures from 2010-2013.

The price of diesel has closely followed the price of gasoline. This graph was generated in ZEMA using NYMEX New York Harbor and Gulf Coast ULSD Futures data as well as New York Harbor RBOB Gasoline Financial Futures. NYMEX New York Harbor ULSD Futures and RBOB Gasoline Financial Futures are both important petroleum benchmarks.

As seen in the two graphs above, since 2010 we have seen a growth in the price for gas and diesel, which makes it a very attractive for traders, investors, and companies in this market – but just how much could Expander actually capture from refinery emissions? A proposed contract with Kitimat Clean Ltd. could see the FTCrude technology increase output by 60,000 barrels per day (based on a refinery process of 400,000 bpd), which would capture “100,000 bpd of residue that would otherwise be wasted and blending them with one billion cubic feet a day of natural gas” (Financial Post).

ZEMA Graphs and data provided by Karen Hung.