Fracking and gas to liquid fuel

fracking and gas to liquid fuelAs the practice of hydraulic fracturing expands on a global scale, both real and perceived effects of fracking have garnered a lot of attention.  How will fracking effect our environment?  Our economy?  Our security?  However, it’s important to remember that fracking itself is an effect as well as a cause—an effect of natural gas demand.  In years ahead, this demand could be seriously influenced by gas to liquid, or GTL, fuel.

Natural gas is quickly gaining ground on oil and its position as the reigning king of the global energy economy.  In recent years, natural gas has become a significant player in production of electricity, commercial materials, and heat.  The last bastion of the fading oil monopoly seems to be the highly established infrastructure of the transportation sector.  Automobiles like cars, buses, freighters, and airplanes all contain engines designed to run on liquid fuels.  The ability of natural gas to break into this market depends on our capacity to convert gas to liquid.

What is gas to liquid fuel?

Gas to liquid, or GTL, fuel is simply liquid fuel produced in an unusual way.  Normally, industrial liquid fuels such as diesel, gasoline, or naptha are produced by refining crude oil.  Gas to liquid fuel on the other hand, is produced from the chemical reaction and refining of natural gas.

Gas to liquid technology was first developed by German chemists Franz Fischer and Hanz Tropsch during World War II1.  The economic devastation Germany experienced following WWI coupled with trade embargoes following the start of WWII severely limited foreign oil imports to the nation1.  As the war effort progressed, fuel demand skyrocketed while domestic reserves became strained.  To sustain the Nazi war front and all supporting industrial activities, Germany was forced to come up with methods of producing its own liquid fuels.

Modern alchemy: gas to liquid technology

The Fischer-Tropsch (FT) process used resources like coal and natural gas to produce much needed liquid fuels—transforming the proverbial lead into gold.  And the German process is still the method of choice for gas to liquid conversion in modern plants.  The FT “recipe” for liquid fuel requires three main ingredients: oxygen, natural gas, and a catalyst.

FT gas to liquid diagramThe FT process also goes through three main stages.  First, oxygen and the methane in natural gas are converted into a mixture of carbon monoxide and hydrogen gas that is called “syngas”5.  Next, the syngas mixture is combined with a catalyst that facilitates a chemical reaction creating water and higher chain hydrocarbons5.  These long chain hydrocarbons are essentially raw materials for the formation of fuels like diesel and naptha.  In a final stage, these materials are refined into usable fuel5.

Conversion of syngas to hydrocarbon may be carried out in several different reactor types, although the latest research is focused on slurry bed reactors5.  This main conversion reaction is also highly exothermic, meaning it produces a huge amount of heat8.  Efficient industrial fuel production requires precise temperature control as well as high pressure operation5.  As a result, the necessary cooling and pressurization apparatus contribute to the high costs of the process.

Economics of gas to liquid

The FT gas to liquid conversion is expensive.  It requires enormous investment of capital in the form of specialized plants and equipment to carry out the complex process.  Current estimates place capital costs at around $25,000 per daily barrel produced at a plant3.  According to that scale, a relatively small GTL plant designed to produce 10,000 barrels per day would cost 250 million dollars to build. Daily operating costs are also high due to cooling and pressure requirements.  Current operating costs are estimated to be around $5 per barrel, meaning that same tiny plant would cost $50,000 a day to run3.

Sasol Oryx gas to liquid plant

South African based company Sasol produces gas to liquid fuel at its Oryx plant in Qatar.

As apparent from the preceding calculations, GTL production becomes profitable only under specific market conditions—that is, a scarcity of oil and an abundance of cheap natural gas.  Historically, GTL has prospered where these conditions were created by political climate.  A prime example was WWII Germany.  South Africa also became a hub of GTL production during the second half of the 20th century.  During South African apartheid, international oil embargoes made gas to liquid fuels an integral part of the South African industrial landscape.

Today, the shale gas boom is taking the place of political influences.  As oil reserves are depleted globally and fracking unlocks new natural gas sources each day, conditions may become ripe for GTL profits.  While the future of gas to liquid economics is still in the speculative stage, current market conditions look promising enough to inspire expansion and new investment in GTL providers.

Major players in gas to liquid

The playing field in the gas to liquid industry is relatively small.  In fact, there are currently only two GTL providers worldwide with significant impact—Sasol and Shell Oil.  While Shell does not specialize in GTL production, it recently completed the single largest gas to liquid facility in the world.  The plant, named Pearl GTL, cost around $19 billion to build and is currently operating in Qatar2.

Sasol branches around the world.

Sasol branches around the world.

Sasol, a synthetic fuel and chemical company out of Sasolburg, South Africa, is a product of the apartheid era gas to liquid boom.  Since the 1950s, Sasol has expanded worldwide, opening branches in Australia, Asia, Europe, the Middle East, and the Americas7.

It’s most recent venture involves a potentially historical event for the United States oil and gas market.  Hoping to take advantage of the US shale gas rush and heavy foreign oil dependence, in late 2012, Sasol announced plans to build the first commercial GTL plant in the nation, in Louisiana2.  The company plans spending on the order of $14 billion on the pioneer facility2.

‘We believe the planets are aligned for G.T.L.,’ said Marjo Louw, President of Sasol Qatar, ‘Other players…will follow.’2

The future of gas to liquid

While Sasol seems confident of a prosperous future for GTL, many major energy companies see the investment as simply too risky.  Exxon Mobil and Conoco Philips previously announced plans to build large scale GTL plants in Qatar after the Shell and Sasol models, but backed out at the last moment, shying away from the multi-billion dollar investment2.  Conoco Phillips and British Petroleum also briefly operated small scale test plants in Alaska and Oklahoma, but never proceeded to full commercial scale development2.

For many, the profit margin is just too volatile.  A prolonged combination of high oil prices and cheap natural gas is necessary for a GTL economy to remain viable.  While the market looks to be heading that way, speculation is often not enough to justify significant commitment of capital.  To date, it is only safe to say that gas to liquid fuels remain a high risk, high reward investment.

Current uses of gas to liquid fuel

Future projections aside, where are we seeing GTL fuels today?   Currently, GTL fuel production is concentrated in Asia, the Middle East, and South Africa.  Significant commercial plants can be found in Malaysia and Qatar as well as in Sasol’s hub of South Africa2.

Qatar Airways gas to liquid flight

Representatives of Qatar Airways, Qatar Petroleum, and Shell Oil gather to celebrate the inaugural GTL flight.

Use of gas to liquid fuel is also becoming more common in the aviation industry.  The first commercial flight using GTL jet fuel was run by Qatar Airways in December of 20129. The inaugural flight was made possible by a partnership between Shell Oil, state-owned Qatar Petroleum, and Qatar Airways9.  The fuel used was produced by the Shell Pearl GTL plant.  Following this success, Qatar Airways plans regular use of gas to liquid fuels, meaning many more GTL flights will be departing Doha International Airport in the near future.  According to Wael Sawan, Chairman of Qatar Shell Company,

‘The production and sale of GTL Jet Fuel is an important milestone for the QP-Shell partnership and testimony to our continued support for Qatar’s position as the GTL capital of the world…This fuel can be safely used for commercial aviation across all legacy aircraft in use across the world as well as the latest models of airframes and engines on the drawing boards today.’9

 

References:

1)       Becker, P. (1981). The role of synthetic fuel in wwii germany.Air University Review,

2)       Broder , J., & Krauss, C. (2012, December 17). Sasol betting big on gas-to-liquid plant in us. New York Times

3)       Economides, M. (2005). The economics of gas to liquids compared to liquefied natural gas. World Energy,8(1),

4)       Kelly-Detwiler, P. (2013, January 17). Gas to liquid plants: no longer exclusive to larger players. Forbes ,

5)       Loeb, C. (n.d.). Fischer-tropsch and solar technologies. Informally published manuscript, Chemical, Biological, and Environmental Engineering, Oregon State University, .

6)       National Energy Technology Laboratory, (2013). Gasifipedia: supporting technologies

7)       Sasol. (2013). Our global presence.

8)       Siemens. (2007, December). Process analytics in gas to liquid (gtl) plants. Case Study,

9)       Qp, qatar airways, and shell introduce gtl jet fuel at doha international airport. (2013, January 9). Arabian Aerospace

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