Conoco unveils GTL research, development strategy
Conoco Inc., Houston, recently unveiled the details of a 2-year-long research project through which it is trying to develop its own gas-to-liquids (GTL) technology. Company officials are optimistic that their new approach to tackling to the old F-T process will pay off handsomely by driving down costs 20-40% and raising production levels in an arena featuring few players.
HOUSTON�Conoco Inc., Houston, recently unveiled the details of a 2-year-long research project through which it is trying to develop its own gas-to-liquids (GTL) technology.
Over the past 2 years, two teams of scientists hired by Conoco have conducted research at Conoco's Ponca City, Okla., complex to make Fischer-Tropsch (F-T) technology commercially feasible in converting large quantities of stranded natural gas to synthetic fuels or petrochemicals. One team focused on the production of synthesis gas, while the other examined the conversion of the so-called "syngas" to synthetic fuels.
While Conoco isn't announcing any intent to become a petrochemical company, it decided to take the "prudent risk" of developing a proprietary GTL process, through which it hopes the production of stranded gas reserves worldwide will be economically feasible. Company officials are optimistic that their new approach to tackling to the old F-T process will pay off handsomely by driving down costs 20-40% and raising production levels in an arena featuring few players.
Natural gas and other hydrocarbons can be converted to synthesis gas�a mixture of hydrogen and carbon monoxide�via steam reforming, partial oxidation, or autothermal reforming. Syngas is then converted to synthetic fuels via the Fischer-Tropsch process.
First developed in 1923 by German scientists, the F-T method was used by Nazi Germany to convert coal to the fuel needed to run its war machine. Germany had discontinued using the process by the 1950s, however, because it was cheaper to import crude from the oil-rich Middle East.
South Africa began developing a synthetic fuels technology after the Arab oil embargo of the early 1970s and the proliferation of anti-apartheid trade policies that made it difficult for the country to access crude oil. So far, Sasol Ltd. of South Africa and Royal Dutch/Shell Group are the only companies whose GTL technologies are used commercially to produce liquid fuels or waxes.
Commercial plants in South Africa and Malaysia use the processes of Sasol and Shell, respectively. Shell's unit has just restarted following a 2-year shutdown prompted by an explosion (OGJ Online, June 27, 2000). The Sasol-licensed unit, owned and operated by MossGas (Pty.) Ltd., uses gas as feedstock, but Sasol has its own pilot plan that converts coal.
Conoco will focus on the conversion of natural gas (as do most other GTL process developers) because of its abundance and relative cheapness. Conoco estimates that 80% of the world�s natural gas reserves lie "stranded," meaning they are too far from demand centers to be economically produced and shipped to market. These remote reserves are accessible to world markets only via costly means such as pipeline and waterborne LNG shipments.
Typically, stranded oil reserves are valued more than stranded gas, which is economically infeasible to produce in remote locations. Large quantities of stranded gas exist in the Middle East, for example, but that supply has been overlooked in favor of oil.
Oil production also is favored over gas in Nigeria, where large quantities of natural gas have been flared. But the nation is placing strict limitations on flaring, so an outlet for the produced gas is needed.
GTL technology has not been actively pursued by many energy companies, due to the expense of developing gas-to-liquid plants, the volatility of oil prices (the process is economical only when oil prices are relatively high), and political instability in countries such as Russia and the Middle East, where large volumes of stranded gas lie. And a lack of infrastructure for shipping and processing gas in many areas, such as Alaska and other Arctic regions, has kept exploration and production companies from producing these reserves.
Although Sasol and Shell are the only firms that have commercialized their GTL technologies, they are by no means the only companies who have developed such process. Energy giant ExxonMobil Corp. owns a patent for a Fischer-Tropsch process, which it filed in 1935. And smaller technology firms such as Syntroleum Corp. and Rentech Inc. have also developed GTL processes.
But process economics have thus far limited the commercial application of GTL technology. This is because relatively large-scale operations are needed to justify construction costs, and because the economics of a GTL project are dependent on the price of oil�the competing source of the fuels and products synthesized via the GTL process.
"If we could guarantee that oil prices would stay at $20/bbl, we would see [more of] these plants getting built,� says Paul J.Grimmer, manager of diversified business development at Conoco. �But nobody�s been willing to bet the farm on that so far.�
The cost and lead time of developing a GTL plant also are obstacles, as nobody knows for sure whether the oil market will be in a downturn once construction is completed. Developing a GTL plant could cost close to $1 billion, while developing a large gas field could total several hundred million dollars.
The sheer size and cost of the equipment needed to build a plant with 500 MMcfd of input capacity also are daunting, officials say. For a plant that size, six slurry-bed reactor columns would be needed. A single column is three times larger than anything Conoco has ever built.
Construction is also more likely to be needed in Arctic regions rather than closer to the equator, where conditions are more favorable, thus increasing costs further.
A unique GTL approach
To achieve its goal of developing a GTL technology, Conoco decided to take a different approach by hiring scientists and engineers, not all of whom had oil and gas experience, to do the research.
Conoco wanted personnel with experience, but also youth and new ideas from academia, says Doug S. Jack, manager of technology development for gas refining. Conoco also sought to hire personnel in their 20s and 30s because of the lack of younger workers in the industry.
�We want this to be a long-term project,� says Jack. "We didn't want to be a one-trick pony."
Rather than grouping scientists together on one team and engineers on another, Conoco assembled its scientists, engineers, and economists together on teams to research F-T and syngas processes. Having them work together allows for greater communication of needs and better collaboration, says Harold A.Wright, team leader for the Fischer-Tropsch research team.
The 60 researchers have tested more than 3,000 catalysts, some of which they invented, plus different types of reactors. Running the catalyst experiments 24 hr/day, 7 days/week, has sped up its development process, says Conoco. The firm also is shaving time off its research by taking advantage of technology that allows it to run its experiments and examine the results more quickly, says Wright.
The scientists say they expect eventually to achieve a conversion rate of more than 90% for the F-T step, using a cobalt catalyst for that process.
Conoco learned a great deal about catalysis from its former parent company DuPont. That knowledge is enabling Conoco to apply modern science to older processes, says Grimmer. The fact that Conoco had no previous experience might have helped, since it went into the project �with no preconceived notions of what works and what doesn�t,� he added.
It hired some of the DuPont scientists who�d begun work on the project but had to go out and hire additional staff once Conoco split from DuPont through a $4.4 billion initial public offering in 1998. That announcement came at the point when Conoco was expanding the research program.
The program�s main hub was in Ponca City, although scientists at DuPont�s Wilmington, Del., facility were also working on the research project.
So far, Conoco says its syngas process is producing less carbon dioxide than other GTL processes, an achievement about which the company is excited. One drawback to its technology is the amount of heat released when converting methane to diesel, which poses an environmental concern.
Conoco is trying to reduce the heat output. While it could be used for generating steam, the fact that the GTL plants will be operating in isolated areas away from large populations makes it less likely that the heat could be used to generate electricity for consumer use, says Rockwell.
Conoco also is seeking to lower the amount of oxygen used as a means of driving down capital costs.
Conoco's GTL research project had been closely guarded "skunkwork" tucked within Conoco, mainly because of concerns that foreign companies would copy the technology if Conoco patented its research. It wasn't until February that Conoco issued a press release on the project, when it announced that Howe-Baker Engineers Inc., Tyler, Tex., would design the 400 b/d semi-works pilot plant to allow further testing of its GTL research.
Conoco didn't disclose where it is considering building the plant but did say that business development work on choosing the site is under way. Ponca City is a leading candidate, as placing the facility next to the firm's refinery would give Conoco a means of selling the plant�s output. Local taxes and availability of labor also will determine the plant�s location, the firm says.
The semi-works plant is scheduled to begin operation in 2002. It will run for a time, during which operating data will be collected, before Conoco begins construction of a larger, 60,000 b/d plant, which it expects to complete within 3-4 years.
With regarded to plant location, Conoco officials say they�re actively pursuing all areas that hold large quantities of stranded gas, which is scattered around the world in more than 20 countries, including locales in Southeast Asia and North and South America. �It�s hard to walk away from the 1,000 tcf�20% of the world gas reserves�in western Siberia,� adds Grimmer.
With natural gas currently trading at a premium in the US, it is unlikely that Conoco would build a large GTL plant here.
Conoco is confident that its technology and work to date put it ahead of its competitors on the GTL learning curve. To achieve the economies of scale needed to make GTL worthwhile, Conoco plans to focus on large gas fields�ones with 3-4 tcf of reserves that would produce 0.5 bcf/day or more�and hopes to bring fuels production up to 60,000 b/d while lowering its capital costs to less than $15,000/b/d.
And, as do other GTL process developers, Conoco proposes building GTL plants close to where stranded reserves are located, gathering supply from one or more fields. The plants would be built near major coasts to allow access to cooling water and to facilitate transport to market, says the firm.
Building a GTL facility offshore would be difficult economically, notes the company. Trying to build a plant large enough to achieve the necessary economies of scale would be difficult, as the unit would have to be scaled down to fit onto a floating production unit. �Eventually, we could go offshore if we can get the costs down,� said Grimmer.
But with a plethora of stranded gas still onshore, it may be a while before companies get interested in producing stranded offshore reserves.