Gas-to-liquids processing has long held the promise of providing a method of monetizing stranded gas reserves by converting them to petrochemicals or clean, liquid transportation fuels. But financial and technological hurdles have, to date, prevented widespread use of GTL for this purpose.
In the view of Sasol Ltd., changing environmental policies and new technological developments will not only improve the commercial prospects for GTL but also lead to large-scale investments in the emerging GTL industry. This, in turn, could create a paradigm shift in the way refiners produce low-sulfur, low-aromatics diesel and perhaps other fuels.
What is GTL?
GTL is a loosely defined term that is generally used to describe the chemical conversion of natural gas to some type of liquid product. As such, it excludes the production of liquefied natural gas but includes the conversion of gas to petrochemicals-methanol and ammonia being the most common applications-and to transportation fuels using various processes.
Over the past few years, GTL process routes based on Fischer-Tropsch (F-T) technology have attracted the most interest. These processes involve the conversion of natural gas to synthesis gas (a mixture of carbon monoxide and hydrogen), followed by the conversion of synthesis gas to heavy hydrocarbons by the F-T reaction and then the work-up of the hydrocarbons into the final products. The primary product is a low-sulfur, low-aromatic, high-cetane diesel fuel (F-T diesel).
Technologies to exploit F-T conversion are being developed by a number of oil majors (Exxon Corp., Royal Dutch/Shell, and BP Amoco PLC, to name the companies that have been public about their work in F-T conversion), by several small GTL companies (Syntroleum Corp. and Rentech Inc.), and by Sasol.
Sasol started life in the 1950s as a coal-to-liquids company in South Africa, as part of a government initiative that began in the 1940s to convert indigenous resources (coal and shale) to liquid fuel products in order to reduce the country's dependence on imports of refined products. With the increase in crude oil prices in the 1970s, Sasol expanded from a small coal-based plant to a much larger facility that exploited Sasol's advances in F-T catalyst technology and reactor design.
Through its experience in operating the world-scale F-T plants commissioned in South Africa in the early 1980s, Sasol developed its technology base-specifically, the proprietary Slurry Phase reactor that is at the heart of its Slurry Phase Distillate process for the conversion of gas to liquids. This process is the basis for the global GTL alliance formed in 1999 by Sasol and Chevron Corp.
What is so special about GTL that makes Sasol believe it has good prospects?
While F-T-based GTL technology is versatile in the sense that it can make a range of products, Sasol believes it is the fact that it can be optimized around diesel that will provide the greatest opportunities for GTL.The diesel from GTL plants has practically no sulfur (<5 ppm), no aromatics (<1 vol %) and a high cetane number (>70). F-T diesel is not different than conventional diesel; it is simply a much cleaner fuel.
Then there are the problems for exploration and production companies that GTL helps solve.
The tightening of government controls on flaring gas during extended test runs or during production have the effect of reducing the opportunity cost of gas that would be subject to flaring controls. Within 15 years, it is believed that there will be universal controls on flaring that will result in either the practice being totally banned in certain areas or very heavy taxes being imposed.
Moves to control flaring improve the prospects and economics of all technologies that eliminate the need for flaring. GTL just happens to be one process that can be used, although it is the one with the largest potential application.
The other challenge for E&P companies is the quantity of gas reserves that are found in remote locations. Monetizing these reserves is a challenge. The options that are conventionally looked at include gas pipelines and LNG. But, with improvements in the economics of GTL (as will be discussed later) and the growing demand for high-quality diesel, E&P companies are increasingly looking to GTL as an option for monetizing remote or stranded gas.
In looking into the next century, there are several policy decisions on global warming and urban air quality that will have major effects on the commercial prospects for GTL (see table this page).
There are also several technology developments that will affect GTL's prospects. These include those that improve the economics of GTL processing and those that affect the market for conventional fuels.
On the latter issue, the development of fuel cells to replace conventional internal-combustion engines could have the biggest impact. However, the full-scale commercialization of vehicles powered by fuel cells-on a scale that has an economic effect on the production and distribution of fuels made from refined crude oil-will probably not take place until the second quarter of the 21st century.
Even when fuel cells are used on a large scale, they will need an ultraclean liquid hydrocarbon fuel source, and liquids made from GTL ventures will be highly desirable candidates.
Regarding the technologies that improve the economics and prospects for GTL, the development of compact, lower-cost reforming processes are likely to have the biggest effect in the short term, as these reduce the capital cost of GTL plants. In the longer term, new reforming technologies based on ceramics could also further reduce the capital requirements for GTL plants.
A more immediate influence on the further refinement and optimization of GTL technology will come from the experience gained in designing, constructing, and operating large, commercial-scale GTL facilities, such as the 30,000 b/d Escravos GTL project being implemented in Nigeria by the Sasol-Chevron joint venture. The experience gained from this project and others like it will allow the technology to move along the learning curve and result in improved yields, lower costs, and increased efficiencies for future ventures.
Impact on refining
The oil refining industry has to make adjustments to face several challenges in the 21st century. Among these challenges are:
- Very low refining margins, resulting from a slowing of growth in demand for refined products and a steady increase in refining capacity through capacity creep and the construction of grassroots refineries.
- Tightening specifications for gasoline, diesel, jet fuel, and fuel oil.
- Pressure to reduce emissions of greenhouse gases and air toxins from refineries.
Sasol appreciates that GTL will probably never supply more than a modest proportion of the world's market for diesel. But the unique properties of F-T diesel, both as a blending component and as a neat fuel, will provide opportunities for Sasol and other GTL technology licensers to work with refiners to meet changes in fuel specifications.
GTL cannot be seen as a threat to refiners. Rather, it represents an opportunity for refiners to meet the challenge of producing cleaner diesel.
F-T-based GTL processes have the potential to bring about a paradigm shift in the oil industry for two key reasons:
- Once F-T diesel becomes readily available from world-scale GTL plants, the fuel will give some refiners the option to buy clean diesel components, thus limiting the investment in capital-intensive product upgrading and hydrotreating that would otherwise be required to produce the cleaner diesel.
- Refiners could install F-T-based GTL plants within the refinery fence and feed them synthesis gas made from gasifying low-value, heavy liquids. By integrating a GTL plant into a refinery, refiners would have the potential to gain synergies through integration of the product work-up section with the existing processing units in the refinery. In time, it is possible that ever-increasing proportions of the "bottom of the barrel" could be processed in this manner.
Challenges for GTL
Although prospects for the emerging GTL industry in the 21st century are promising, a number of challenges remain. The more important of these are:
- Economics of GTL.
Using currently available technologies, Sasol believes there are several promising opportunities for greenfield GTL ventures, even at oil prices of about $15/bbl (US, 1999). This is due to reductions in the capital cost of Sasol's technology to about $25,000 per installed daily barrel of capacity. However, local conditions could make it difficult to achieve this, and investors in GTL projects need to evaluate carefully appropriate contracting and construction strategies.
The input cost of natural gas is a critical issue for GTL projects, which require low-cost feed in order to be economic. There are, however, many instances in which a low price for gas can be justified by the oil-gas producer, particularly where the opportunity to use the gas has associated advantages-for example, increased coproduction of gas liquids or elimination of the need for and cost of flaring or reinjection. The challenge is to find opportunities where the oil-gas producer is prepared to share some of the benefits that are offered by GTL in the form of a competitive gas price.
- Oil price outlook.
GTL product prices are sensitive to crude oil prices. The short-term outlook for oil prices in mid-1999 was that they would remain at about $17/bbl, and Sasol is confident that a GTL venture can be profitable at this level. While there is always a risk that oil prices could drop again to the low levels experienced 1998 and early 1999, as the technology improves, it is likely that GTL economics will become more robust towards changes in oil prices.
- Uncertainty over future tax and fiscal incentives.
With the rapid changes in legislation governing flaring, emissions, and fuel quality, there are numerous examples of fiscal measures put in place by politicians to assist suppliers in meeting the tough new standards, such as the emergence of tax incentives in Europe to stimulate the use and production of cleaner fuels. While these are seldom permanent measures and therefore cannot be relied on to justify the viability of projects, they do offer opportunities to improve the economics of GTL projects.
- Cooperation with refiners.
Despite the wonderful properties and characteristics of F-T diesel, Sasol knows and understands the dominant role played by oil companies in the mass marketing of refined products. Despite the challenges facing refiners as a consequence of the rapid move toward tighter specifications for all refined products, GTL is not the only solution, and it is not going to solve all the problems of the refining industry.
Sasol also knows that F-T diesel has a value greater than that of commodity diesel, and it believes that refiners and independent refined product traders could use F-T diesel to solve some of the problems of the industry. Once the Sasol-Chevron GTL alliance and other such ventures begin producing F-T fuels from a number of world-scale GTL plants, the challenge is to find a way of working with and within the refining industry.
Sasol presents three scenarios for expected growth in commercial GTL capacity during the next 15 years:
- Low growth-0.5 million b/d of capacity by 2015.
In this scenario, growth in GTL capacity has virtually no impact on the oil supply-demand balance.
- High growth-2-3 million b/d of capacity.
In this scenario, growth in GTL capacity is large enough to create a significant shift in the oil supply-demand equation.
- Modest growth-1-1.5 million b/d of capacity.
In this scenario, growth in GTL capacity is large enough to have an impact on oil supply and demand, but not a significant one.
Sasol believes the modest growth scenario is the most likely outcome for GTL.
While Fischer-Tropsch technology is not new, the availability of commercial GTL processes such as Sasol's for converting remote or flared natural gas to fuels is. And broad commercial acceptance of any specialized application takes time.
Nevertheless, fuels production via GTL has the indisputable benefits of adding value and portability to stranded gas reserves and doing the same for flared gas production, while simultaneously reducing emissions of greenhouse gases. It is for these reasons, and because F-T fuels have such obvious environmental benefits, that Sasol has confidence in the future viability of GTL.
George Couvaras is managing director of Sasol Synfuels International (Pty.) Ltd., the Sasol Ltd. subsidiary involved in a global joint venture with Chevron Corp. for the development, operation, and marketing of gas-to-liquids ventures incorporating Sasol's Slurry Phase Distillate process. Previously, he was involved in the development of new business ventures for the Sasol group relating to chemical projects and was engineering manager for the transformation of the old 1950 Sasol synfuels plant at Sasolburg, South Africa, into a chemical plant. Couvaras has BS and MS degrees in chemical engineering from the University of the Witwatersrand in South Africa.