Gas to liquid

I read with interest Mr. Paul Grimmer's recent comments on gas-to-liquid (GTL) economics (OGJ, July 10, 2000, p. 7). It is surprising that Conoco is about to spend an additional $50 million on a GTL pilot plant to develop technology limited to large projects, which can be supported by no more than 2% of the world's gas fields, when more flexible technology is currently available. Although Concoco's approach may be confined to large-scale projects, it would be a mistake to conclude that this restriction applies to the technologies of other companies, which have experience at the pilot and demonstration plant level that Conoco lacks.

Mr. Grimmer's view of the world ignores a critical application of GTL technology in myriad remote oil fields (both existing and to be discovered) with associated gas that has no economic outlet (except via GTL) where flaring is prohibited, or where existing flares are to be phased out. This is where an economic benefit truly lies for E&P companies: booking oil reserves trapped by gas-along with the gas reserves of course-and getting on with the process of monetizing those reserves. The combined economics of making GTL products and commensurately permitting the production of otherwise trapped oil can more than offset any size disadvantage that smaller-scale plants may have. Size is great where the opportunity exists, but it isn't everything.

Fortunately for industry and consumers, GTL can and will be used in a wide variety of sizes. Small plants will prosper side by side with giants, each having its place and each making its contribution. Four years from now, when Conoco hopes it will be ready to begin engineering on a 60,000 b/d plant, I believe that others will already have considerable commercial GTL production experience. Trends in markets, technology, and regulation are rapidly converging, creating a role for GTL that will be central rather than marginal, sooner rather than later.

Economic GTL technology-for large plants and small-is a reality today, readily available for companies that want to seize GTL opportunities now rather than take the time, money, and risk to invent their own. The "make vs. buy" analysis is classic. Why invest scarce technical resources just to reinvent what you can buy off the shelf? Maybe the "reality check" will come when Conoco fully considers how it will gain economic or competitive advantage by spending $50 million to be 5 years late with a technology limited to 2% of the potential market.