Shell considering GTL plants in Egypt, Trinidad

Darius Snieckus
OGJ Online
BINTULU, Malaysia -- Shell International Gas Ltd. will consider Egypt and Trinidad as possible future sites for high-capacity gas-to-liquids (GTL) plants as part of a major investment program in that emerging energy market.

The announcement, made at Shell's flagship Middle Distillate Synthesis (SMDS) facility in Bintulu, Malaysia, builds on the company's earlier plans to undertake similar studies in Indonesia and Iran.

Shell said the program could result in an investment of $6 billion in the construction of several GTL plants over the next 10 years.

SMDS�a three-stage process developed at Shell International Gas Ltd.'s 12,000 b/d Bintulu plant that transforms natural gas into "ultra clean" middle distillates products like naphtha, gasoil and kerosine�has "proved to be an attractive alternative to liquefied natural gas (LNG) and we are actively seeking opportunities around the world for more second-generation SMDS facilities," said Jack Jacometti, vice-president of SMDS global development.

"These four studies could result in total development costs of more than $6 billion," he said, "and would offer substantial benefits in terms of economic, social and environmentally sustainable development with an already proven technology."

Shell's Bintulu GTL facility, which uses gas from fields offshore Sarawak, has only been back on flow since June, after a 2� year, $5 million safety upgrade.

In 1997 the plant's air separation unit suffered a massive explosion which Shell said was caused by a build-up of minute atmospheric particles from forest fires that ravaged the island that year.

In Egypt, Shell, Egyptian General Petroleum Corporation (EGPC), and the Egyptian Oil Ministry have initialed a development protocol deal for a 75,000 b/d GTL conversion facility outfitted with SMDS technology, and "at least" one LNG train producing some 500 MMscf," to development a tranche of the country's "uncommitted" gas reserves.

The protocol would be a stepping stone toward a gas supply agreement and joint development agreement to bring an LNG plant into operation by mid-2004, and an SMDS facility by late-2005.

Jacometti said that "what [Shell is] really targeting is to get three to four [SMDS] prospects off the ground by getting them to the point of Final Investment Decision"�Shell's term for an "irreversible" commitment to a project. He stressed, however, that the company was only in "second stage" discussions with relevant parties including the governments of Egypt, and Trinidad and Tobago, and "prospective partners."

"All the big players are very keen to get [GTL] off the ground," Jacometti added. "We all see it as an emerging industry and the next stage to LNG and want to repeat this success we have had we LNG." He noted that ExxonMobil had invested roughly $400 million in GTL R&D in the last year, while BP had announced plans to build a 300 b/d GTL pilot plant in Alaska.

Separately, Shell is conducting a feasibility study for a 75,000 b/d conversion facility in Trinidad and Tobago, which could be onstream "by 2005-06" and would double current middle distillate exports from the country.

Shell said the plant would need a gas intake of around 600 MMscf/d�roughly equivalent to a large LNG train's gas input.

Catalyst developed
SMDS was an outgrowth of Shell's exploratory research into alternative sources of energy in the early-1970s. In 1973, the company embarked on a program that sought to modernize Germany's Fischer Tropsch synthesis of synthesis gas into liquid hydrocarbons.

Shell's GTL pilot project, launched in 1983, led to the identification of Bintulu�which it operates in a 65:35 joint venture with Malaysian state oil company Petronas�as a site for its SMDS facility.

Shell said what has allowed it to move high-capacity GTL plants toward commercial viability has been the development, in Amsterdam, of a proprietary cobalt-based catalyst for the facility's reactors which effectively doubles efficiency.

Shell claims the catalyst, along with "economies of scale and the commercial experience of Bintulu," has cut capital expenditure from $50,000 b/d to around $20,000 b/d, making a 75,000 b/d plant an "attractive proposition" even with crude prices down to $15/bbl.

With large-volume daily output levels now possible through the 5-7% improvement in the catalyst, the company is no longer reliant on the production of specialty products to steady the economics of future GTL plants.

Shell said one appeal of GTL to the global oil and gas industry is the technology's ability to bring otherwise non commercial "stranded" gas accumulations to the marketplace, especially from remote regions such as onshore Siberia, the Former Soviet Union, China, and offshore Canada, Australia, and Southeast Asia.

A recent report by UK oil and gas consultant Smith Rea Energy Ltd. said using GTL to develop large-scale stranded gas deposits onshore could "add significantly to world fossil fuel reserves" and shift the balance of global reserves away from being "so heavily weighted toward the Middle East."

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