Gas-to-Liquids (GTL) plants were all the rage some time ago with environmentalists supporting the use of cleaner burning fuels in lieu of gas. However, recent developments in this area have indicated that GTL plants may be less feasible than was earlier anticipated.

Gas-to-Liquids plants improve energy availability

Gas-to-Liquids plants convert natural gas to liquid fuels and other products which are commonly extracted from crude oil. GTL plants ensure that gas is not burned immediately; instead, it is converted into cleaner fuels which are safer for the environment. Products that can be commonly extracted from natural gas in a GTL plant include gasoline, jet fuel, diesel and waxes. In the process, sulfur and carbon dioxide is removed from the gas in order to prevent contamination during the conversion.

Figure 1: Gas-to-liquids process

Gas-to-Liquids
Source: Energy Information Administration (EIA)

Natural gas is considered to be in plentiful supply and is considered to be the most efficient of the three major fossil fuels. According to Sasol Limited (ADR) (NYSE:SSL), natural gas emits 40% less carbon dioxide than coal, it is a more flexible and cleaner source and it can be used in conjunction with a renewable resource to provide a constant supply to the grid.

Conversion technology moves from East to the West

Five Gas-to-Liquids plants are already in operation across the world, especially in the developing world. Two plants are situated in Malaysia while two are in operation in Qatar and one has been built in South Africa.

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) (NYSE:RDS.B) has constructed the largest Gas-to-Liquids plant in the world in Qatar at a total development cost of USD 18-19 billion. The plant has the capacity to process 1.6 billion cubic feet per day (bcbfd) of gas and can process 3 billion barrels of oil equivalent (boe) of gas over the life of the project. Shell and Sasol have remained the prominent players in this industry and both the companies have proposed new projects in North America.

Table 1: Gas-to-Liquids plants in operation

Plant Name

Location

Capacity (bblpd)

Operator

Completed

Pearl GTL Qatar, RasLaffanIndustrialCity 140,000 Shell 2011
Bintulu GTL Malaysia, Bintulu, Sarawak 14,700 Shell 1993
Mosell Bay GTL South Africa, MosselBay 45,000  Sasol Ltd. (SSL) 1992
ORYX GTL Qatar, Ras Laffan 32,000 Sasol Ltd. (SSL) & Chevron 2007

Sasol Limited (ADR) (NYSE:SSL) is currently constructing another plant in Nigeria in collaboration with Chevron Corporation (NYSE:CVX) by the name of Escravos GTL (EGTL). Another joint venture with Petronas in Uzbekistan is in the planning phase. Furthermore, four new projects are proposed to be constructed in Louisiana in North America by Royal Dutch Shell plc (ADR) (NYSE:RDS.A) (NYSE:RDS.B), Sasol, Juniper Networks, Inc. (NYSE:JNPR) and G2x Energy. However, recently, Shell has backed out of its plan for the Louisiana project quoting high costs and margin uncertainty.

Shell abandons project

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) (NYSE:RDS.B)’s Gas-to-Liquids plant in Louisiana was estimated to be constructed at a cost of USD 20 billion with a output capacity of 140,000 barrels per day (bblpd). However, the oil giant has recently stated that despite the ample supply of gas in North America given the shale boom, the plant may not be feasible.

Shell has cited the uncertainty of future crude oil and gas prices as the reason for project abandonment. “For a gas-to-liquids plant to make money, a barrel of oil has to trade at a ratio of about 16 times the cost of a million British thermal units of natural gas,” says Bloomberg.

Sasol Limited (ADR) (NYSE:SSL), on the other hand, has reassured the public that it plans to go ahead with its construction plans. “While we cannot speak for another company’s plans, we continue to view our proposed Gas-to-Liquids facility in Louisiana as a very attractive opportunity as we advance it through the front-end engineering and design phase,” Russell Johnson, a spokesman for Sasol stated to Bloomberg.