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Prepared by the
Institute for the Analysis of Global Security

May 24, 2004
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China and US should set up a strategic dialogue on energy issues
Interview with Dr. Gal Luft of the Institute for the Analysis of Global Security, originally published by 21st Century Business Herald in Chinese.

A crude threat
The terrorist campaign against Iraq's pipelines demonstrates that pipeline attacks are no longer a tactic but part of a sustained, orchestrated effort that can deliver a significant strategic gain. They can also cause significant damage to the global oil market.
Next in line to emulate the insurgents in Iraq could well be Islamist terrorist groups operating in Central Asia, among them Chechen separatists and the Islamic Party of Liberation, a group that seeks to carry out a holy war against the West and is a suspect in the recent wave of deadly attacks in Uzbekistan.

Chilly response to U.S. plan to deploy forces in the Strait of Malacca
Whether something is profoundly wrong in the dialogue between the U.S. and the two Asian powers is an important question in itself, but the real issue is what is the best mechanism to secure the world's most important shipping corridor, through which one quarter of world trade and half of the world's oil and two thirds of liquefied natural gas move each day.

Highlights from the Department of Energy’s International Energy Outlook 2004-2025

North Sea oil is declining
Since the 1970s North Sea oil has not only been a major source of wealth for both the British and Norwegian economies but also a way for Europe to cut its dependence on Middle East oil. Now many of the major fields in the North Sea are in decline and the North Sea is about to lose its prominent role as one of the world's leading oil domains.

Terror's Big Prize
Since September 11, pipelines, tankers, refineries and oil terminals have been attacked frequently. Except for a sharp increase in maritime insurance premiums in these regions these attacks had marginal strategic consequences. But in at least two cases oil terrorism could have rattled the world.

Libya: changing its spots?
Libyan crude oil is particularly attractive due to its very low sulphur content, which requires much less refining than higher sulphur oil. It is extremely high quality crude, whose characteristics are not easily found elsewhere. Despite its unique treasure, Libya's production capacity is relatively small, standing on 1.5 mbd of crude, or 2% of world supplies.
Since the 1988 Lockerbie bombing Libya had been under U.S. and UN sanctions which hindered its ability to generate enough investment to develop its oil sector. Libya's decision to embark on a rapprochement with the U.S came at unsurprisingly perfect timing, just as concessions for major U.S. oil companies were about to expire.

On the technology front

Fuel Cell power plant installed at NJ College
The fuel cell will provide 250 kilowatts of electric power as well as heat, to several buildings on the campus.

EU study: Methanol from biomass - competitive with gasoline
A study of a new patented Swedish technology concluded that the alchohol fuel methanol can be produced from biomass via black liquor gasification at a cost competitive with that of gasoline and diesel.

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Back Issues

Biomass-to-Ethanol Progress

Ethanol, also known as grain alcohol, is an alcohol fuel that can be used to power flexible fuel vehicles. Today, ethanol is made by fermenting agricultural products such as corn, sugar cane, or sugar beet. These feedstocks, however, account for but a small portion of the total crop. Production of ethanol from cellulosic biomass such as corn leaves and stalks has the potential to augment the feedstocks in the existing industry and become the technology of the future for fuel ethanol production. The enzyme costs of converting cellulosic biomass into sugars for fuel ethanol production have been reduced approximately twenty-fold with technology developed by the National Renewable Energy Laboratory (NREL) and Denmark based Novozymes, biotech-based leader in enzymes and microorganisms.

In January 2001, using funding from the US Department of Energy (DOE), NREL and Novozymes entered into a USD 14.8 million three-year collaborative research subcontract. During the course of the contract, Novozymes applied its proprietary biotech research platform to increase enzyme activity and fermentation yield, and to reduce production costs for enzymes used to convert cellulosic biomass into sugars for production of fuel ethanol and other valuable products. In February 2004, Novozymes reported a twelve-fold enzyme cost reduction exceeding the ten-fold goal.

Based on the latest achievements of NREL in the pre-treatment of cellulosic biomass materials and combining the improved treatment process with the advances already made in enzyme technology by Novozymes, the two partners have now been able to reduce the costs of the enzyme part of the biomass-to-ethanol conversion from above 5 U.S. dollars to below 30 US cents per gallon of ethanol.

Douglas Kaempf, Program Manager for the Office of Biomass Program at the US Department of Energy, stated, "Combining Novozymes' advances in enzyme technology with the advances made by NREL in the pre-treatment of corn stover, we have gained important synergies between performance and costs."

To continue this progress, Novozymes has been granted a one-year extension to its three-year subcontract with NREL and will receives USD 2.3 million over a year. The aim of the extension is to ensure a further cost reduction to a level of approximately 10 U.S. cents per gallon of ethanol for the enzyme part of the biomass-to-ethanol conversion. If this goal is achieved, the new process will be closer to becoming commercially competitive with current starch-based fuel ethanol production.

Ethanol is not the only fuel that can be produced from biomass: Atlantic Biomass Conversions, in joint work with scientists at the US Agriculture Research Service (ARS), is developing a genetically enhanced bacterial process to directly convert sugar beet pulp wastes to methanol, wood alchohol. Another effort is underway in Sweden to produce methanol from biomass via black liquor gasification at a cost competitive with gasoline and diesel.

Also see:
GM and National Ethanol Vehicle Coalition Partner To Promote Use of E85
Volkswagen AG and Archer Daniels Midland Announce Biodiesel Research Agreement