Apr-2009

Conversion of natural gas to liquid fuels

Companies aiming to bring gas to liquids projects to the commercial stage have encountered variable success

Chris Cunningham

Article Summary

The main perceived advantage of gas-to-liquid (GTL) technology is that it can make profitable use of stranded gas. Countries in the Middle East, for example, have huge reserves of natural gas and associated gas; in particular, Qatar’s North Field and its Iranian continuation, the South Pars field. But the local market for fuel gas is limited and there is no pipeline infrastructure to ship it to larger economies. The export of liquefied natural gas (LNG) at very low temperatures by specially constructed vessels is an established solution, but GTL technology can convert gas into a liquid form that is easier to transport.

Despite the logic behind arguments in favour of GTL, the outlook for this group of technologies is far from certain. In its current World Energy Outlook report, the International Energy Agency (IEA) says that another means of producing liquid fuels from non-petroleum sources, coal-to-liquids (CTL), would dominate that market in the foreseeable future. CTL would account for about 1.1 million bpd of fuel supplies by 2030. GTL would provide another 650 000 bpd, for a combined “non-conventional” capacity of 1.75 million bpd in 20 years’ time.

According to the IEA, the world is far from running short of oil; oil sands and extra-heavy oil, for instance, account for 6 trillion barrels of reserves. Even more oil might be recoverable from oil shale if cost and environmental challenges could be overcome.

Projections of future development of GTL are in need of qualification, according to the World Energy Outlook, in view of uncertainties about future choices of technology and the resulting mix of fuels, the evolution of the technologies, how production costs will develop relative to alternative ways of exploiting the resources, and future environmental concerns.

Assuming that Shell’s Pearl project in Qatar comes on-line as expected in the early part of the next decade, along with Sasol Chevron’s Nigerian GTL plant, total world GTL capacity would hit 200 000 bpd by 2012. However, high costs and potential limits to CO2 production could confound development of the technology. If a CO2 penalty of $50 per tonne were to be introduced, GTL production costs would rise by $10 to $12.50 per barrel, reckons the IEA.

Competition for LNG projects might also restrict the development of GTL. However, the IEA assumes that GTL plants will go ahead where supplies of stranded gas are an incentive to do so, while other projects may not make progress.

Until the Oryx project, a joint venture in Qatar between Sasol and Chevron, began ramp-up, the only commercial, natural gas-based, low-temperature Fischer-Tropsch GTL plant operating anywhere to date was Shell’s 12 500 bpd unit in Bintulu, Malaysia. Shell started experimenting with GTL technology during the 1970s, when it began to search for an alternative to gasoline. Early in the 1980s the company was discussing a window of opportunity to produce gasoline from synthesis gas produced by its Shell-Koppers coal gasification technology. Since then, fluctuations in gas and petroleum prices have dampened the enthusiasm for major capital outlay to produce such non-conventional fuels. The Bintulu demonstration project was launched in 1993, but suffered a major setback in 1997 when an explosion at the site was caused by soot from forest fires in Indonesia. It took three years to repair the damage.

Since then, fuel from the Bintulu plant has built up a small but growing presence on the market. In 2002, Shell announced its Pearl GTL venture, in partnership with state-run Qatar Petroleum. For both partners, the project offers diversification. Gas-rich Qatar can turn some of that resource into higher-value fuel and lubricants, reducing its exposure to shifts in natural gas prices on the international market. For Shell, Pearl is the key to its efforts to reduce its dependence on petroleum-based products as concerns grow about the depletion of the world’s oil supply. Some 35 000 workers are employed at what is one of the world’s largest construction sites.

However, the first full-scale GTL plant to approach design capacity is the Oryx project, also in Qatar and operated by a joint venture between South African Sasol and Chevron. It is nearing its design capacity of 34 000 bpd. In February 2009, the plant had produced an average of 29 000 bpd, having started to produce final product early in 2007.

Other companies have considered a move into GTL, but have remained uncommitted because of technological and cost concerns. In 2007, soaring costs forced Exxon Mobil and Qatar Petroleum to shelve the Palm GTL project, after more than a decade of planning and engineering development work. The 154 000 bpd complex would have converted natural gas into diesel and lube base stocks. ConocoPhillips and Marathon Oil have also abandoned planned GTL projects in Qatar, while in 2008 Algeria cancelled tenders for a GTL project.

However, companies with a clear commitment to GTL are pursuing further ventures outside Qatar. For instance, Sasol and Malaysia’s Petronas are studying a possible gas-to-fuels plant in Uzbekistan that could be bigger than Sasol’s Qatar plant. Uzbekistan will soon become a net oil importer, hence the need for local fuel production. The country has more than 60 trillion feet cubed of gas reserves and a Sasol plant would need about 3 trillion feet cubed. While Uzbekistan currently produces its own oil, its production volumes are falling, so it is expected that the country will soon become a net importer of oil. As a result, Uzbekistan is eager to produce its own transportation fuel rather than import fuel. The project is at the pre-feasibility stage, but it is expected to move to a full feasibility study during 2009.

Sasol is also looking at opportunities in China and India to apply its proprietary technology to produce gasoline, diesel and chemicals from gas or coal.

Another co-venture for Sasol, with Chevron, expects its Nigerian GTL plant to be operational by 2012. Sasol was reviewing the Escravos plant in mid-2008, as it saw the project’s costs doubling to $6 billion and completion delayed by a year to 2011. In September, it cut its stake in Escravos to 10%, selling 27.5% to Chevron, which now owns 75%. The plant, located 60 miles (100 km) southeast of the capital city Lagos will produce 34 000 barrels of oil equivalent per day, similar to the scale of Oryx. An expansion of the Escravos gas plant, which will feed the $5.9 billion GTL plant, is now expected to start production in 2010.

Natural gas to syngas
GTL processes start with synthesis gas production. The front end of the plant uses a reformer or gasifier to convert natural gas into carbon monoxide and hydrogen. This technology is similar to processes that were used for years to make methanol and ammonia. This syngas is then fed into a Fischer-Tropsch reactor, which converts it into a paraffin wax that is hydrocracked to make a variety of products, mostly diesel, but also some naphtha, lube oil base stocks and gases.