Natural Gas-to-Liquids (GTL) as a Drop-in Diesel fuel

[The reason GTL is a big deal is that it can substitute for diesel without having to modify a diesel engine to do so — therefore, it’s a “drop-in fuel” substitute.

However, GTL isn’t likely to be the answer, since it’s far more “economically attractive” to use natural gas to produce electricity and Liquified Natural Gas (LNG), according to the U.S. Energy Information administration.

Once oil begins to decline, a substitute for diesel fuel must be found to continue to allow the billions of truck, train, shipping, and agricultural tractor/harvester etc., diesel combustion engines to operate since they can’t run on diesohol, ethanol, and can at most use 5 to 20% biodiesel (though there are some truck diesel engines warrantied now for 100% biodiesel).  Yet even if all diesel engines were warrantied for 100% biodiesel, there can never be enough biodiesel made to be the sole provider of freight vehicle fuel, not even if all oilseeds (soybeans, etc) now being used for food were also converted to biodiesel.

Currently there are only 5 GTL plants in the world producing from 2,700 to 140,000 barrels/day.  Another is under construction, and 3 are proposed in the USA, only 1 large-scale).

There are 2 articles below. The 1st one explains the GTL process and the 2nd looks at the largest GTL plant in the world in Qatar. 

In the USA, a GTL plant can only be profitable if it maximizes wax production for the chemicals market rather than making diesel and other fuels.

Alice Friedemann]


Tom Murphy on Gas to Liquids

As with coal, methane gas can be synthesized into liquids like octane via the Fischer-Tropsch method.

The U.S. uses about 20 tcf of natural gas per year. A liter of octane (at 700 grams) requires 1100 liters of natural gas. Replacing a 3% annual shortfall of 200 million barrels (at 160 ℓ/bbl) of oil would require 35 trillion liters of methane, or 1.2 tcf: a 6% annual increase in natural gas production—similar to the impact on coal.   The U.S. Energy Information Agency projects that shale gas—currently at about 15% of domestic gas production— will nearly triple by 2035 to be our single biggest resource for natural gas. This is on top of a conventional supply that falls by 29% over the same period. In aggregate, the rapid expansion of shale gas allows a slow net growth rate of 0.4% per year. The faith in shale gas to deliver seems stretched a bit, so that it is difficult to assess the likelihood of net gas production growth at all. And even if it does grow, the 0.4% per year projection falls far short of the 6% level that would be needed to offset a 3% per year decline in oil.

Gas-to-liquids plants face challenges in the U.S. market

February 19, 2014. United States Energy Information Administration (EIA)

The most common GTL technique to convert natural gas to diesel and other liquid fuels (and waxes) is Fischer-Tropsch (F-T) synthesis.

Although F-T synthesis has been around for nearly a century, it is very expensive but has lately been of interest due to the growing spread between the value of petroleum products and the cost of natural gas.

The first step is to convert natural gas to a mixture of hydrogen, carbon dioxide, and carbon monoxide (syngas) and then removing sulfur, water, and carbon dioxide to prevent catalyst contamination. The F-T reaction combines hydrogen with carbon monoxide to form different liquid hydrocarbons. These liquid products are then further processed using different refining technologies into liquid fuels.

The F-T reaction typically happens at high pressure (40 atmospheres) and temperature (500o-840oF) in the presence of an iron catalyst. The cost of building a reaction vessel to produce the required volume of fuel or products and to withstand these temperatures and pressures can be considerable ($18-19 billion to create the Qatar facility).

Diagram of GTL process, as explained in the article text

Source: U.S. Energy Information Administration

There are currently five GTL plants operating globally, with capacities ranging from 2,700 barrels per day (bbl/d) to 140,000 bbl/d. Two in Malaysia,  two in Qatar, and one in South Africa. One plant in Nigeria is currently under construction.

Three plants in the United States are proposed, only one of them  a large-scale GTL plant.  Update Jan 29, 2015: Sasol has delayed an expansive $14 billion project in southwestern Louisiana to make diesel out of natural gas. The Sasol project depended on two dynamics in the energy markets: oil prices remaining high and natural gas prices staying low, because the conversion process for producing diesel is expensive and highly complex. Now any diesel produced by the plant would almost surely cost more than diesel produced by conventional refiners.  The Westlake, La facility would have produced 96,000 barrels of fuel a day. “In order for the G.T.L. technology to pay, it has to use inexpensive natural gas and sell into a high-priced market, the $100-a-barrel oil market we have grown accustomed to the last few years,” said Don Hertzmark, an international energy consultant who has worked on gas-to-liquids and other global natural gas projects for three decades. “That cost advantage has collapsed, taking with it the profit potential for G.T.L. in the United States at least for now.   GTL technology has a mixed record — the world’s largest plant in Qatar, cost $19 billion, 3 times more than its original projected cost, and was plagued with unexpected maintenance problems. BP and ConocoPhillips briefly operated demonstration plants in Alaska and Oklahoma, but never built a commercial facility. Exxon Mobil and ConocoPhillips announced plans to build giant plants in Qatar, but backed out, putting their capital instead into terminals to export liquefied natural gas (Krauss).

In December 2013, Shell cancelled plans to build a large-scale GTL facility in Louisiana because of high capital costs. The Annual Energy Outlook 2014 does not include any large-scale GTL facilities in the United States through 2040. Other uses for available natural gas in industry, electric power generation, and exports of pipeline and liquefied natural gas are more economically attractive than GTL.

To improve the profitability of GTL plants, developers have reconfigured their designs to include the production of waxes and lubricating products. Because of the smaller size of the chemical market, smaller-scale GTL plants similar to those proposed in the Midwest are economically viable. F-T waxes are used in industries producing candles, paints and coatings, resins, plastic, synthetic rubber, tires, and other products.

High Costs Slow Quest For Ultraclean Diesel

February 23, 2007, by Russell Gold. Wall Street Journal 

[Although this article was published in 2007, it’s still true in 2014.

Updates: In 2012 the Shell Qatar plant reached full production of 140,000 GTL barrels/day (b/d), a drop in the bucket of the 90,000,000 b/d produced worldwide and over its lifetime will produce 3 billion barrels of oil equivalent (half GTL, half other products), less than 1 month of world oil production]

The rush to build a new industry that turns natural gas into a transportation fuel is stumbling over rising costs, showing how tough it is for emerging fuels to compete with crude oil.

This past week, Exxon Mobil Corp. backed out of plans to build an enormous gas-to-liquids, or GTL, plant in Qatar. Yesterday, Royal Dutch Shell PLC broke ground on its own similarly sized GTL plant in Qatar, but said the cost might have tripled to as high as $18 billion.

  • The Hope: Energy companies have been investing in a potential petroleum substitute that turns natural gas into a liquid fuel.
  • The Problem: Gas-to-liquids projects have surged in cost due to overall oil-patch inflation.
  • The Result: Exxon Mobil this week joined other companies putting GTL projects on hold.

Escalating budgets are threatening to constrain the growth of the GTL industry, which produces a clear liquid that can run existing diesel engines without any of the sooty pollutants associated with diesel. The rising costs of steel, engineering and labor have led to steep inflation among major energy projects world-wide, underscoring how the rush to find new fuel sources is driving up the cost of developing them.

Higher costs have hit companies developing Canada’s oil sands, where crude is packed into tar-like deposits. Prices for corn and other crops have risen, in part, because of the U.S.’s increasing interest in ethanol.

Other than Shell’s Qatar facility, the only other GTL plant under construction also is facing cost pressures. Last year, Halliburton Co. hal -10.86% took a charge to earnings because of delays and cost increases for the plant its KBR Inc. kbr -11.23% unit is building in Nigeria for Chevron Corp. cvx -5.42% and Sasol Ltd. ssl -10.03%

Exxon officials wouldn’t say whether rising costs were the main factor in the decision to drop plans for the Qatar GTL plant. “Deciding not to progress with GTL is in line with our investment approach, which is very disciplined,” said Exxon spokeswoman Jeanne Miller.

Other GTL proposals, including projects led by Marathon Oil Corp. MRO -11.02% and ConocoPhillips, cop -6.72% in recent years were put on hold.

Exxon’s decision is likely to cause other companies to rethink their commitment to GTL. Bernard Picchi, an energy analyst for research and trading firm Wall Street Access, who keeps close tabs on GTL, said he expects other GTL hopefuls “to take a timeout, a deep breath and re-evaluate the cost and technology.”

Using technology developed in Nazi Germany, the process of turning natural gas into liquids had long been too expensive to be commercial. Small-scale GTL plants in Malaysia, operated by Shell, and South Africa, by Sasol, have been in operation for years. Several years ago, the Middle Eastern nation of Qatar decided to encourage large projects to turn its natural-gas resources into an exportable liquid fuel. The scale of the facilities, as well as rising oil costs, were expected to make the GTL fuel competitive. The Exxon and Shell projects, alongside a project by Sasol, were set to generate more than 300,000 barrels a day of the fuel.

Qatar hoped the plants could help GTL put a dent in crude oil’s near-monopoly on the world’s largest energy market — powering the world’s vehicles — by creating an alternative fuel.

Shell Chief Executive Jeroen van der Veer, flanked by Qatar’s energy minister and Prince Charles of Britain, said yesterday that Shell had an advantage over other competitors because of the GTL plant in Malaysia it has operated since 1993. “For us, GTL is proven technology,” he told reporters in Qatar, according to Reuters. He said the project remained inside its development-cost estimates of $4 to $6 per oil-equivalent barrel of production over a period of time.

Based on that, total project costs have been pegged as high as $18 billion based on estimated lifetime output of about three billion barrels of oil equivalent. A Shell spokesman said that is comparable to other big exploration and production projects it undertakes.

At the same time as announcing the end of its GTL project, Exxon said it had been selected by Qatar Petroleum to participate in a project to tap offshore natural gas for the industrial and power sector. The project, in which Exxon will own a 10% stake, will deliver 1.5 billion cubic feet of gas a day by 2012.

Krauss, C. Jan 28, 2015. Oil Company Sasol Delays Huge Louisiana Project as Prices Slide. New York Times.

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