The global interest in gas-to-liquids (GTL) is expected to grow mainly because of projects developments in Qatar, QNB has said in a report.
Global GTL production capacity could more than double by the decade end to nearly 0.5mn bpd, if major plants under discussion go ahead, QNB said.
Recent landmark developments in the industry include the commissioning of the second train of Pearl GTL in Qatar, moves by Qatar Airways to utilise GTL as jet fuel and plans for new GTL plants in the US and elsewhere.
The report said the future of GTL will depend on whether capital costs can be kept under control and on long-term expectations for the price premium of oil over gas/LNG.
The GTL process converts natural gas into refined liquid fuels, such as kerosene and diesel. These can be more easily transported to relevant markets than gas, and have a higher sales value than raw gas.
The GTL process is a chemical transformation, in contrast to purely physical methods of reducing the volume of gas for transportation by increasing pressure, producing compressed natural gas (CNG), or reducing temperature, producing liquefied natural gas (LNG).
Unlike CNG and LNG methods, GTL products do not require any special equipment to transport or use, as they are similar to fuels derived from crude oil. Moreover, the purity and quality of the GTL fuels also mean they are considered suitable for high-value applications, such as jet fuel.
The chemical process underlying GTL was developed nearly a century ago. However, high capital development costs limited its application except in situations where countries lacking oil reserves needed security of fuel supplies. This was the case for Germany during the Second World War and for South Africa under sanctions during the apartheid era.
Both countries used coal rather than natural gas as the feedstock for the process.
Sasol, a South African firm, brought the technology to Qatar to build the 34,000 bpd Oryx GTL plant in partnership with Qatar Petroleum.
At its launch in 2006 it was the world’s largest GTL plant, but has since been surpassed by Pearl GTL, a joint-venture of Shell and QP.
Its first train was commissioned in 2011 and the second last summer. The entire plant is currently operating at around 85% of its nameplate capacity of 140,000 bpd of GTL.
This capacity is equivalent to more than half of global GTL production.
According to QNB it is too early to judge which technology—GTL or LNG—will offer better returns on investment in the long-term. This will depend on the average premium of liquid fuels over LNG prices over the lifetime of the projects, compared to the difference in capital and operational costs.
Currently, GTL capital costs are about 2-4 times those of LNG, affected by several factors such plant size and the potentially volatile prices of construction materials.
The GTL conversion process also consumes some of the gas feedstock.
Depending on the particular plant and local cost of gas, GTL is considered to break even at about $40- $80 per barrel.
Refined oil prices are currently well above this level, providing strong profit margins.
One place where a significant premium has opened up between oil and gas prices is in the US.
The US shale gas revolution has driven down local gas prices at a time of high oil prices, thereby boosting the appeal of GTL.
The US government’s Energy Information Agency (EIA) forecasts that the ratio of domestic oil to gas prices will be twice as high in the period until 2030 than it was in the previous two decades.
Although Sasol and Shell hold most of the expertise and patents for large-scale GTL plants, new firms are entering the sector. Oxford Catalysts, a spin-off from the university science department, is developing smaller-scale modular GTL technology, suitable for daily production ranging from a few hundred to a few thousand barrels.
This could help capture “stranded” associated gas from oilfields which would otherwise be flared. Petrobras, for example, is considering this technology to utilise the associated gas in Brazil’s offshore oilfields.
GTL-derived fuel has less environmental impact than conventional jet fuel as it has a higher energy density and cleaner emissions. Coal-derived GTL jet fuel has been used in South Africa for over a decade, and British Airways is planning on using some biomass-derived GTL jet fuel.
Qatar Airways is leading the way in usage of natural gas-derived GTL jet fuel, and began commercial flights this month utilising up to 50% GTL kerosene.
Source: Caye Global News, Gulf Times
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