Gas-to-liquids processing hits its stride

Recent improvements in gas-to-liquids (GTL) technology have made the process economic for developing remote gas reserves under certain conditions.

A multiclient study by Arthur D. Little Inc. (ADL), Cambridge, Mass., indicates that recent strides in processing, catalysts, and plant operations are finally making the technology commercially viable, nearly 75 years after development of the original Fischer-Tropsch process.

"While components of GTL technology have existed for many years, recent announcements suggest that it is on the brink of commercial viability," said ADL.

GTL produces high-quality, essentially sulfur-free petroleum products, and these liquids are easier to transport than the natural gas from which they are made.

"That's much more efficient than the traditional means of commercializing stranded gas, which require complex interlocking contracts to reduce volume risk, as well as inflexible physical infrastructure," said ADL's Johannes Thijssen. "AndellipseGTL products can be brought to market earlier than traditional alternatives."

Tim Partridge, vice-president of ADL Canada, said, "GTL will revolutionize the gas industry the way the first LNG plant did about 40 years ago."

Process improvements

ADL says that steady improvements in GTL technology, rather than single breakthroughs, have moved the process closer to commercial viability. These improvements include:

Larger air separation units (maximum size has increased to 3,500 tons/ day from 1,500 tons/day).
Higher-capacity synthesis gas production (syngas generation capacity has increased by a factor of 3-4).
Improved multiphase reactor technology (for slurry and hybrid-type reactors).
Improved cobalt-based synthesis catalyst (better activity and selectivity).

These advances have led to an increase in the maximum single-train capacity of GTL plants.

ADL looked at the GTL technologies of Exxon Corp., Sasol Ltd., and Royal Dutch/Shell. As a means of comparison, the study examined plants with output capacities of 5,000-100,000 b/d in 11 gas-rich areas.

ADL concluded that all three processes were technically and economically viable at capacities greater than 50,000 b/d, at Brent prices of $20/bbl or more, and in areas where construction and natural gas costs are low.

"GTL technology is broadly competitive with LNG and/or pipeline gas," said ADL.

The firm believes the process will be improved further through scale enhancements, learning-curve effects, and additional technology breakthroughs.

"Scale-the bigger the better-location, and gas price are the keys to success," said Partridge, "and the combination of these factors points to the Middle East, Russia, and parts of Latin America as the most attractive places for GTL projects."

Economics

Project economics are highly dependent on construction and feedstock costs, with only certain fields providing acceptable internal rates of return. ADL cited Qatar and eastern Venezuela as examples of ideal locales for GTL plants.

A breakdown of process costs shows that a 100,000 b/d plant in Qatar could have capital, feedstock, and operating costs totaling as little as $17.50/bbl (see chart, p. 34).

Tulsa-based Syntroleum Corp., a GTL process licenser that did not participate in the study, agrees with ADL's conclusions about the viability of GTL for plants 50,000 b/d and larger.

Regarding Syntroleum's process, company official John Ford said, "Feasibility studies indicate that, at size ranges above 10,000 b/d, Syntroleum plant costs are less than oxygen-based systems. Syntroleum technology also permits economic plants as small as 2,500 b/d-something that competing technologies do not claim" (OGJ, Aug. 4, 1997, p. 68).

Syntroleum has been conducting research and bench-scale development in this area since 1984 and has been operating pilot and demonstration plants since 1992.

"Design work is going forward on several joint development projects," said Ford, "with the first commercial plant scheduled to come on stream at the end of 1999."

Sasol and Shell are already operating commercial units (see chart, this page). And Mobil Corp.-another GTL process developer that didn't participate in the ADL study-has operated a commercial unit for some time.

Exxon is planning to start up its first commercial unit after 2000 (OGJ, June 23, 1997, p. 16).

Another GTL technology developer that was not part of the ADL study is Rentech Inc., Denver (OGJ, July 21, 1997, p. 36). Rentech operates a 235 b/d demonstration-scale plant and expects to commercialize its process in 2000.

Rentech, in general, agrees with the statements made by ADL about process economics, but says ADL's cost of synthesis gas production seemed a bit high and its feedstock costs a bit low.

"The costs proposed are consistent with the capital costs we have developed," concluded Rentech's Mark Koenig.

Rentech also commented on the complexity of evaluating GTL processing costs: "GTL plants of 30,000 b/d or more are mini-refineries. They do not just sell crude oil, they sell refined products. A GTL plant producing crude oil only has a more difficult set of economics than one selling diesel fuel, jet fuel, and other high-value end products."

Plant construction

ADL predicts a surge in GTL projects in the coming years.

"We expect to see a 1-2 million b/d GTL industry evolving over the next 15-20 years, to the tune of $25-50 billion of investment in 15-30 plants," said Partridge.

ADL says that major oil companies see GTL as a way to capture equity positions in large gas reserves. "Other technology providers will probably compete with major oil companies in time, and they will also use their technology as bargaining chips in moving upstream into equity gas," added the firm.

The ADL study concludes that 5-10 engineering and construction firms and 10-20 equipment manufacturers, including industrial gas firms, will benefit from a construction boom in the GTL industry. The impediments to even greater use of GTL processing include low oil prices, contractor limitations, and technology risks.

"On balance," said ADL, "GTL commercialization is likely to provide both important new opportunities and challenges to contractors, as well as technology providers, producing countries, oil companies, equipment manufacturers, consuming countries, and refiner/marketers.

"Commercialization of GTL technology will be profoundly affected by the licensing strategies of technology owners. Currently, a number of oil and gas companies are pursuing their own R&D or are appraising third-party technologies, but few are willing to license. This means that industry players without GTL technology will need to find partners or accelerate internal R&D.

"The good news," concludes ADL, "is that, as with any important new technology, new technical improvements are likely to occur and will further enhance GTL attractiveness."

ADL does not expect GTL plants to seriously disrupt oil markets during the next 15-20 years. The only likely effects in crude oil markets will be a short-term weakening of prices and an erosion of demand for crudes that yield greater than average quantities of distillates, according to the firm. The process could, however, impact distillate and naphtha markets in certain regions.

"Consuming countries will be interested in the environmental benefits of GTL diesel, but we believe it will be marketed principally as a blending component rather than a niche fuel," added ADL.