Some Setbacks for Synfuels

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While the Government puzzles over synfuels policy, many projects are falling by the wayside. For instance, a proposed coal liquefaction plant in Morgantown, W. Va., that was to have been built by the U.S.. West German and Japanese governments was dropped after estimated development costs rose in less than a year from $750 million to $1.5 billion.

Even so, some large oil companies, including Exxon, Chevron and Sohio, are investing heavily in synfuels. Says Clifton C. Garvin. chairman of Exxon, which has committed $1 billion to such projects worldwide: "By the turn of the century, we think this country will get about 4 million or 5 million barrels a day of liquids from shale oil and coal. It's prudent to develop a reasonable-sized synthetic industry, in part because of national security, and in part because of economics."

Oil executives say that synfuel development will now be easier because the red tape attached to Government subsidies under the Carter Administration has largely been removed. Explains J.F. Trautschold Jr., general manager of Mobil's synfuels division: "If we had solicited money from the Government, we would have had to hire probably ten more auditors just to meet the Energy Department's demand for information."

Nevertheless, synfuel projects often cost $1 billion or more, and some developers are deciding that they are too expensive. Conoco's proposed coal gasification project in Noble County, Ohio, has been stopped because the Reagan Administration refused to subsidize it.

Energy companies are also looking particularly closely at the high costs of all synfuel projects because of the declining price of oil. A shale oil or coal liquefaction proposal that might have been economically viable a year ago, when oil seemed to be heading toward $50 per bbl., might not make sense now, when the price is dropping toward $30 per bbl.

Moreover, oil industry skeptics point out that the proponents of synthetic fuels have been arguing since the days when oil was only $2 per bbl. that synfuels would be profitable if the price of petroleum went up another dollar or two. Yet every time the price of oil goes up, the estimated price for synfuel development also seems to increase. Those doubters predict that the cost of crude will have to go much higher before synthetic fuels are truly competitive with petroleum. Thus many of the ambitious plans for turning coal into oil and gas may stay on the drawing boards for years. —By Edward E. Scharff. Reported by Robert T. Grieves/New York and Gary Lee/Washington

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