[SouthTexas]

This is true and that is part of what keeps the price up. I wonder what the price of NG will do IF they ever get around to using it as a diesel substitute. Friend told me a while back that they needed 5.00 and haven’t been near that in a while. Haven’t looked lately.

[Clay Moore]

Natural gas is currently 2.20-2.40/million Btu depending on market.

http://www.bloomberg.com/energy/

[thackney]

I wonder what the price of NG will do IF they ever get around to using it as a diesel substitute. Friend told me a while back that they needed 5.00 and haven’t been near that in a while.

There is two parts to making it competitive with diesel. The cost of the conversion and the cost of the natural gas. The $5 was probably reasonable when the natural gas was $4 per MMBTU. But when the price of Natural Gas fall significantly, that price break would fall.

The ratio between the price of Crude Oil versus Natural Gas has climbed greatly. I would expect we recently reached the point where it would be economic to make the conversion based upon some other reports. However, a major company is not going to invest billions into a conversion facility unless the have significant confidence in that price differential remaining for years.

I don't have that confidence myself. I think we will see the demand for Natural Gas climb significantly with greater demand in new uses.

A few years ago, Shell had the process economical enough to build a large gas-to-liquids facility in Qatar. They did build it producing kerosene and diesel like products. At that time they said the economics worked in a region where the local price of natural gas was very low due to much greater production versus demand. There they compete against the expensive process of creating LNG. I suspect their process is a similar or slightly greater expense, but the end result is a much higher value product.

[thackney]

diesel substitute. Friend told me a while back that they needed 5.00

To be clear, that means to me the price of diesel would have to be $5 per gallon for natural gas converted to diesel-like product to be economical.

The economics work either when diesel stays high priced, or when natural gas stays relatively low priced.

[thackney]

http://www.shell.com/home/content/aboutshell/our_strategy/major_projects_2/pearl/overview/

Pearl GTL will be the world’s largest source of gas-to-liquids (GTL) products, producing 140,000 barrels of GTL products each day. The plant will also produce 120,000 barrels of oil equivalent per day of natural gas liquids and ethane.

LOCATION: QATAR, RAS LAFFAN INDUSTRIAL CITY
Category: Integrated gas and gas-to-liquids project
Operator: Shell
Development cost: $18 billion-$19 billion
Peak Production: 320 kboe/d of gas resulting in:
- 140 kboe/d of gas-to-liquids products (2 trains)
- 120 kboe/d of natural gas liquids and ethane
Total production: 3 billion boe of natural gas over the life of the project

They have been operating a similar plant in Malaysia for over 15 years.

[thackney]

And for the details of the same project:

http://www.shell.com/home/content/innovation/meeting_demand/natural_gas/gtl/process/acc_gtl_processes.html#subtitle_1

Water and condensates are separated from the gas. Other components, such as sulphur, are also removed and cleaned. The gas is then cooled and the natural gas liquids are removed via distillation. The remaining pure natural gas (methane) flows to the gasification unit.

QUICK FACTS
- The extracted sulphur is used for other purposes, such as producing fertilisers, in asphalt and concrete.
- The natural gas liquids are piped to Ras Laffan port and sold as chemical feedstocks and LPG fuel for heating appliances and vehicles.

Making synthesis gas

In the gasifier at around 2,200-2,650°F (1,400-1,600°C) the methane and oxygen are converted into a mixture of hydrogen and carbon monoxide known as synthesis gas, or syngas.

QUICK FACTS
- The reaction produces heat, which is recovered to produce steam for power.

Making liquid waxy hydrocarbons

The synthesis gas enters one of 24 reactors. Each reactor holds a large number of tubes containing a Shell proprietary catalyst. The catalyst serves to speed up the chemical reaction in which the synthesis gas is converted into long-chained waxy hydrocarbons and water.

QUICK FACTS
-The catalyst consists of tiny granules, just millimetres long with microscopic holes, containing minute metal particles. The total surface area of the microscopic holes in the catalyst granules is more than eighteen times the surface area of Qatar.
- The synthesis process generates a lot of heat, which is also used to produce steam that in turn powers the GTL plant via steam turbines.
- All water in the GTL process is purified and reused in the utilities system of the plant to generate steam.
- Placed end-to-end the tubes would stretch from Qatar to Japan.

Making GTL (gas to liquids) products

The plant creates a range of products from natural gas that would otherwise be produced from oil.
Using another Shell proprietary catalyst, the long hydrocarbon molecules from the GTL reactor are contacted with hydrogen and cut (cracked) into a range of smaller molecules of different length and shape. Distillation separates out the products with different boiling points.

GTL PRODUCTS

GTL Naphtha is used as a chemical feedstock for plastics manufacture.

GTL Kerosene can be blended with conventional Jet Fuel (up to 50%) for use in aviation – known as GTL Jet Fuel – or used as a home heating fuel.

GTL Normal paraffins are used for making more cost-effective detergents.

GTL Gasoil is a diesel-type fuel that can be blended into the global diesel supply pool.

GTL Base oils are used to make high-quality lubricants.