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Sasol One Step Closer to Huge U.S. Gas-To-Liquids Plant
Fox Business News ^ | 2012 | Ben Lefebvre

Posted on 01/27/2013 6:16:26 AM PST by Wonder Warthog

Sasol Ltd. (SSL, SOL.JO) said Monday it will begin engineering and design work on what would be the first refinery to convert natural gas into diesel in the U.S., paving the way for one of the largest investments from the boom in U.S. shale gas production.

The facility, estimated to cost about $14 billion, would convert low-cost natural gas into clean-burning diesel it can sell at much higher prices. Sasol plans to locate the facility in Westlake, Louisiana, and if greenlighted, it will become the single largest investment in the state's history, Louisiana Gov. Bobby Jindal said. Sasol said it will make a final investment decision on the plant in 2014, after the engineering and design review is finished.

U.S. natural gas prices earlier this year became the lowest in the world as the increasing use of hydraulic fracturing helped bring domestic inventories to record heights. Companies like Cheniere Energy Inc. (LNG) and Exxon Mobil Corp. (XOM) want to export the commodity to profit from the price disparity with other countries, where natural gas can cost five times as much. Gas-to-liquids, or GTL, technology would allow South Africa-based Sasol, the world's largest producer of motor fuel from coal, to tap into the differential between cheap natural gas and relatively-high priced liquid fuel products. Royal Dutch Shell PLC (RDSA, RDSA.LN) is also scouting locations for a possible GTL plant in the U.S.

U.S. natural gas prices for January settled at $3.59 a million British thermal unit on the Nymex on Monday, a price that would put it about $32 a barrel. That compares with $132 a barrel for January Nymex heating oil, used as a benchmark for diesel prices.

GTL plants, however, are expensive--Sasol's Louisiana proposal would cost three times as much as a new traditional refinery. They also have a history of going over budget and past schedule, such as Shell's $19 billion Pearl plant in Qatar. Sasol has already increased the cost of the project by $6 billion from an estimate it made in September, partly because it will be built in two phases, the company said. But despite the staggering cost, Sasol is already considering other GTL projects in North America, Chief Executive David Constable said in an interview.

"The abundance of natural gas in North America gives GTL a great future here," Mr. Constable said. "This is just the beginning."

The plant's two phases would start operations in 2018 and 2019. It would consume about 1 billion cubic feet of gas a day, Mr. Constable said.

Sasol also operates a 34,000 barrel-a-day GTL facility in Qatar.

The large gulf between natural gas and oil prices will eventually shrink because growing demand will lift gas prices and gains in production will bring crude prices lower, said Sarah Emerson, principal at energy consultancy ESAI Inc. But GTL projects should bring decades of profits for companies that can afford the hefty start-up costs, Ms. Emerson added.

"It's a margin story, and the early adopters will make the most money," she said.

Sasol spends about two-thirds of its capital outlay in its home country of South Africa but has said previously it plans to grow its presence in the U.S. and Canada over the next few years. On Monday, it said it will prioritize its projects in the U.S. over Canada.

As part of its U.S. growth strategy, Sasol is also going ahead with the construction of an ethane cracker that will cost between $5 billion and $7 billion and will have an annual production of 1.5 million tons of ethylene. The company said it is putting a plan to build a GTL plant in Canada on hold, having previously said it was thinking about building a 48,000-barrel-a-day plant in Alberta that would cost about $8 billion.


TOPICS: Extended News; News/Current Events; Technical
KEYWORDS: diesel; energy; gtl; naturalgas
Using natural gas to make diesel.
1 posted on 01/27/2013 6:16:31 AM PST by Wonder Warthog
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To: thackney

Dunno if you have a ping list, but this may be of interest.


2 posted on 01/27/2013 6:17:41 AM PST by Wonder Warthog
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To: Wonder Warthog

You aren’t going to run a locomotive on solar.


3 posted on 01/27/2013 6:21:04 AM PST by Shady (Libya shows us how Americans rate...)
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To: Wonder Warthog

Did anyone else notice this in the 2nd. paragraph?

“would convert low-cost natural gas into clean-burning diesel it can sell at much higher prices.”

You notice there was no mention of making the Diesel any cheaper, only converting it so they can make more profit.

Not that there is anything wrong with profit.One might think if the initial product were cheaper, we could add in the extended cost of the plant and sell a cheaper Diesel.

LMAO Anyone see that happening?


4 posted on 01/27/2013 6:22:38 AM PST by Venturer
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To: Venturer
You notice there was no mention of making the Diesel any cheaper, only converting it so they can make more profit.

Yep, saw that. Two things I took away from that sentence. First, since natural gas is so cheap as the input, the resulting product (diesel) can be sold at a high profit ... the spread between the input fuel and resulting product which can be sold at a higher price.

Second, the rest of the world runs much more diesel than regular gas as we do in the US, and that diesel costs much more overseas than it does here. Clearly they already have plans to convert natural gas to diesel here then export it overseas to maximize their profits.

5 posted on 01/27/2013 6:28:38 AM PST by usconservative (When The Ballot Box No Longer Counts, The Ammunition Box Does. (What's In Your Ammo Box?))
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To: Venturer

I think the point here, and of course I may be wrong, is that the cost of converting oil into diesel with the EPA requirements is driving the cost of diesel to the high cost it is today.

Gas to liquid conversion will be able to compete with the oil to diesel conversion at the present gas per BTU cost at the well head.

There have been some pilot plant conversions that have been successful and now it is time to take these to full scale production facilities.

Capitalism as it is, it will probably come in cheaper at first and slowly work its way back up. However, I am not sure if it is successful what will the refineries do with the waste stream that they converted to diesel. Maybe someone can answer that.


6 posted on 01/27/2013 6:32:32 AM PST by eartick (Been to the line in the sand and liked it)
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To: Venturer
Sasol needs the profit to pay down its investment. If the company sold the new diesel for less than market price, their product would be sold out first, that's all...
7 posted on 01/27/2013 6:33:19 AM PST by Eric in the Ozarks (In the game of life, there are no betting limits)
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To: Venturer
I saw it, but it didn't register because I was concentrating on the rape of NG to get diesel.

I don't know what the ratio is, but if (f'rinstance) two parts NG makes one part diesel ... it's an ultimate loser.

8 posted on 01/27/2013 6:37:39 AM PST by knarf (I say things that are true ... I have no proof ... but they're true)
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To: Venturer
Did anyone else notice this in the 2nd. paragraph? “would convert low-cost natural gas into clean-burning diesel it can sell at much higher prices.”

So? No matter how successful the plant is, the percentage of world supply of diesel it produces will be miniscule. It won't affect overall diesel price, and will be very profitable.

What are they supposed to do? Should they say, "We were able to make this diesel more cheaply, so we'll take less than market price for it?"

A driving force for innovation is the prospects of outsize profits for a while, until everyone else catches up.

9 posted on 01/27/2013 7:04:06 AM PST by Pearls Before Swine
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To: Venturer

Didn’t you follow gas shale fracing? Ever hear of supply and demand?

Its unlikley the GTL producers like SASOL will be able to manipulate the market and if too many build these plants they too will see the same result as do the shale gas companies.

Add fuel competition from trucks and possibly locomotives going to LPG, new huge oil shale fields and Canadian oil via Keystone PL, at some tipping point fuel prices come down, of course aside from government meddling.


10 posted on 01/27/2013 7:04:16 AM PST by X-spurt (Republic of Texas, Come and Take It!)
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To: Wonder Warthog

If anybody thinks Obama and his EPA henchmen are going to allow this to happen I got a bridge to sell ya.

Now, if it was a solar plant...


11 posted on 01/27/2013 7:41:54 AM PST by unixfox (Abolish Slavery, Repeal The 16th Amendment!)
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To: X-spurt

I love your optimism. I do not expect to see energy prices come down in my lifetime, even if the Ocean turned to fuel.

Oh It will drop a little for a short while every now and then to tease us, but the Government has it just about where they want it for right now.


12 posted on 01/27/2013 7:52:49 AM PST by Venturer
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To: X-spurt; Pearls Before Swine; knarf; Eric in the Ozarks; eartick; usconservative

All good answers.


13 posted on 01/27/2013 8:01:37 AM PST by Venturer
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To: knarf

The answer to the ratio is in the article -

“U.S. natural gas prices for January settled at $3.59 a million British thermal unit on the Nymex on Monday, a price that would put it about $32 a barrel. That compares with $132 a barrel for January Nymex heating oil, used as a benchmark for diesel prices.”

That puts it at 4:1. Seems there room for some profit to me, and they wouldn’t invest billions if they didn’t think so, too.


14 posted on 01/27/2013 8:03:49 AM PST by biggerten (Love you, Mom.)
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To: Venturer; usconservative
“would convert low-cost natural gas into clean-burning diesel it can sell at much higher prices.”

This one plant is not going to produce enough to make any significant change in a large volume globally priced commodity.

If there was not a significant difference in cost for the feedstock to the product, the $19 Billion plant would not get built.

But any additional diesel puts pressure to lowering the price. And proving the first plant works economically builds the incentive to build more plants and likely creates a path for technology advances that further lower the cost.

- - - - - - -

Second, the rest of the world runs much more diesel than regular gas as we do in the US, and that diesel costs much more overseas than it does here. Clearly they already have plans to convert natural gas to diesel here then export it overseas to maximize their profits.

That great deferential in price is due to more taxes. The wholesale price in Ultra Low Sulfur Diesel varies little between places like Europe, South America and North America.

15 posted on 01/27/2013 8:25:58 AM PST by thackney (life is fragile, handle with prayer)
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To: Venturer
Did anyone else notice this in the 2nd. paragraph? “would convert low-cost natural gas into clean-burning diesel it can sell at much higher prices.” You notice there was no mention of making the Diesel any cheaper, only converting it so they can make more profit. Not that there is anything wrong with profit.One might think if the initial product were cheaper, we could add in the extended cost of the plant and sell a cheaper Diesel. LMAO Anyone see that happening?

I think out of the box...

What if the products sole customer is an Airlines? I.E. JP-4/8 at much lower prices?

Was it Delta that bought a refinery in PA a year ago?

What if via their vertical integration, they start snagging all the PA Macellus Gas for JP conversion at a price point that gives that Airlines some margins again?

That is a game changer....

16 posted on 01/27/2013 8:31:05 AM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: Venturer

The most recent example is the price of NG and how newly discovered abundant shale gas affected and gave us a three fold drop almost overnight.

My optimism is based on observing the history of the oil patch close up. Boom or Bust, rarely stable. When demand overcomes supply drilling booms, everyone that can beg, borrow or build a drilling rig jumps on and next is an over-abundance and bust.

I do expect that NG could finally bring some long-term stability because there is so much they can valve it on and off to better match demand. If shale gas plays out the next and much more plentiful source is yet to be developed hydrolized methane.


17 posted on 01/27/2013 8:42:17 AM PST by X-spurt (Republic of Texas, Come and Take It!)
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To: knarf
two parts NG makes one part diesel ... it's an ultimate loser.

Not when the cost of diesel per BTU is 6 times the cost of Natural Gas per BTU.

Natural Gas has been running in the $3.50~4.00 per million BTU for the price to an industrial customer.

United States Natural Gas Industrial Price
http://www.eia.gov/dnav/ng/hist/n3035us3m.htm

Diesel Wholesale price is running about $22~25 per million BTUs.

Ultra-Low-Sulfur No. 2 Diesel Fuel Spot Prices
http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm

With an abundance of supply and relatively low cost, there is no reason to spend a couple BTU to convert the energy to a more usable form. Just as we do converting low price coal into electricity for ease of use, converting natural gas to diesel for ease of storage and transportation works.

18 posted on 01/27/2013 8:47:41 AM PST by thackney (life is fragile, handle with prayer)
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To: taildragger

That was an oil refinery. It is not capable of turning natural gas into jet fuel. It takes in crude oil for making petroleum products.

The equipment is not capable of switching from one to another.


19 posted on 01/27/2013 8:53:56 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
I f'got about you, thackney ... sorry ... you ARE our in house energy expert.

Thanx for your knowledge.

20 posted on 01/27/2013 8:55:22 AM PST by knarf (I say things that are true ... I have no proof ... but they're true)
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To: thackney

Moving a low to medium rank fuel into a high rank fuel makes loads of sense. Just a coal beings in big, stationary power plants.

But upgrading coal to motor fuel, the producer should expect to sell it for a higher price...


21 posted on 01/27/2013 9:03:08 AM PST by Eric in the Ozarks (In the game of life, there are no betting limits)
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To: thackney
Dear thackney,

The article says that the plant will use about 1 billion cubic feet per day of natural gas. In terms of energy equivalence, that appears to be around 7 million gallons of diesel per day, if my calculations are correct.

However, I imagine that some of the natural gas will be “lost” in the process. Do you have some idea of how much diesel the plant will be able to produce from the reported input of 1 billion cubic feet per day?

Thanks,


sitetest

22 posted on 01/27/2013 9:13:23 AM PST by sitetest (If Roe is not overturned, no unborn child will ever be protected in law.)
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To: sitetest

I don’t have latest data, but a few years ago the expected efficiency for these kinds of processes was 60-70%.


23 posted on 01/27/2013 9:21:36 AM PST by jjotto ("Ya could look it up!")
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To: Eric in the Ozarks
But upgrading coal to motor fuel, the producer should expect to sell it for a higher price...

Sure, just like electricity sells for more per BTU (kWH) than coal does.

24 posted on 01/27/2013 10:15:39 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
That was an oil refinery. It is not capable of turning natural gas into jet fuel. It takes in crude oil for making petroleum products. The equipment is not capable of switching from one to another.

Agreed, and thanks for your expertise and always talking us down from the ledge Thackney :-) !

What Ididn't say is what is stoping them or someone else from getting a refinery and retrofiting it, or scrapping it for a new plant because it is already a brown-field if you will for a GTL?

25 posted on 01/27/2013 10:16:15 AM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: sitetest

I don’t know the input/output ratio for energy. I would not be surprised to see 50% losses, but I could easily be off by 50%.

More info at:

http://www.sasol.com/sasol_internet/downloads/SASOL_GTL_Brochure_1332426778928.pdf


26 posted on 01/27/2013 10:22:41 AM PST by thackney (life is fragile, handle with prayer)
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To: taildragger

I think there would be little of use other than the tank farm.

I suspect it would be cheaper to build a new facility to converting. The process has little to be in common.

Think of converting a cheese factory to run on grape juice instead of milk. I realize that in nonsense, but I am trying to emphasis they are not convertable.


27 posted on 01/27/2013 10:27:44 AM PST by thackney (life is fragile, handle with prayer)
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To: thackney
This one plant is not going to produce enough to make any significant change in a large volume globally priced commodity.

It doesn't have to, and in fact I'd argue the plant wouldn't be being built IF it did have the capability to affect prices.

If there was not a significant difference in cost for the feedstock to the product, the $19 Billion plant would not get built.

DING, DING, DING! Winner, winner Chicken Dinner!! Precisely what I was thinking also. That's exactly why this plant is being built where it is.

The wholesale price in Ultra Low Sulfur Diesel varies little between places like Europe, South America and North America.

No doubt taxes play a substantial role in the price difference. The missing component in the price here is the cost of converting one's currency to the Dollar which is used to pay for fuel commodities. That affects the price also, in some cases significantly.

28 posted on 01/27/2013 11:10:31 AM PST by usconservative (When The Ballot Box No Longer Counts, The Ammunition Box Does. (What's In Your Ammo Box?))
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To: Wonder Warthog
Sasol is also going ahead with the construction of an ethane cracker that will cost between $5 billion and $7 billion and will have an annual production of 1.5 million tons of ethylene.

Just a couple of tweeks and you can be synthesizing ethanol directly from ethylene and steam (tap water). No corn, no fermenting, no distillation, and Archer Daniels Midland can kiss there Federal subsidy bye bye.

I've been pushing for liquid hydrocarbon synthesizes since crude began it's climb to the stratosphere. WWII Germany made all it's diesel fuel and high octane aviation gas from coal. We have even more coal reserves (600 years) than natural gas. It's about time we started an energy program that makes us independent of imported crude. The Arabs can go back to racing camels and buggering goats.

Regards,
GtG

29 posted on 01/27/2013 5:27:59 PM PST by Gandalf_The_Gray (I live in my own little world, I like it 'cuz they know me here.)
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