Gas-to-liquids plants face challenges in the U.S. market

Energy Information Administration ^ | FEBRUARY 19, 2014 | Energy Information Administration

[Still Thinking]

When Sasol built their first plant in SA (Sasolburg), they got a guarantee from the government to buy product at $20/bbl equivalent, so at that time they could make a clear, un-subsidized profit at any crude price over $20. And now that SA’s pussed out and are no longer international pariahs and can buy crude wherever they want, they STILL built an additional gasification plant (Segunda). If it’s such a bad deal even in a nation with access to oil, why would they build it?

I’m sure operating costs are somewhat higher now, so figure maybe $40-50 crude should be break-even. We’re substantially above even that. Plus, part the the reason the Seffricans wanted it was strategeric, they wanted to be energy-independent (and besides, had no choice, as you note). So both from a strategic sense and a pure economic sense, it would seem to me to be a good idea, so long as there isn’t something about our coal that makes it more expensive or less feasible in some way.

[thackney]

they STILL built an additional gasification plant (Segunda).

You do know they built that 3 decades ago, right?

The first half of Secunda CTL, completed in 1980, cost U.S.$3.2 billion in dollars of the day. Sasol 3 (the mirror-image of Sasol 2), completed 1984, cost $2.5 billion in dollars of the day.

[Still Thinking]

Geez, time flies. I thought it was much more recent than that.

[thackney]

Notice they haven’t built one since.

I’m all for the process. And I had high hopes for Shell’s GTL in the US. With three commercial plants already in operation, they knew the real costs better than anyone.

CTL or GTL would be great because the distribution and consumption infrastructure is already in place.

[bestintxas]

“there has to be a hitch somewhere
That would be the cost of converting to a liquid.”

Actually, the feedstock cost(i.e - raw gas price) is the main problem on commerciality.

Check out where those five GTL plants are

1. Malaysia(Bintulu) - lots of very cheap gas, also has LNG there for many years
2. Qatar - largest gas field in world, largest LNG in world

South Africa does not have cheap feedstock; however, they do have abundant supplies of coal which is synthesized into gas. This happened during aparthied when no one would sell them hydrocarbon liquids. Different situation, and they have become experts on this technology in the interim.

[thackney]

Cheaper feedstock can overcome the profitability. But the feedstock cost is less than the conversion cost, or it would be already profitable already in the US

[thackney]

South Africa does not have cheap feedstock;

BTW, in addition to their coal classification, they get significant amounts of Natural Gas from Mozambique.

http://www.sasol.co.za/about-sasol/south-african-energy-cluster/sasol-gas/business-overview-sasol-gas

[bestintxas]

“Cheaper feedstock can overcome the profitability. But the feedstock cost is less than the conversion cost, or it would be already profitable already in the US”

I worked LNG many years and found this a true statement(feedstock cost must be cheap). Reason Mobil built Arun plant and the Algerians built those a long time ago.

GTL might have different metrics than LNG. Have you seen a comparison of the two?

[thackney]

Not a direct dollars comparison. But the GTL plants in Qatar are economical because they really compete with exported LNG versus a significant local demand like in the US.

It is why companies like Shell built the GTL after the LNG facilities were already up and running in Qatar. Both were spending capital to build facilities to buy local natgas and export to another country. If there was greater profits to be made in LNG, I expect that they would have built that instead. With two other commercial GTL facilities, they had already proved their process and economics.

[thackney]

For reference: Same country, same company and almost the same time frame

First LNG, then as the American Market began to shift and no longer would need Nat Gas imports, the GTL. But the start of that GTL economic justification is not firm to me.

http://www.shell.com/global/aboutshell/major-projects-2/qatargas.html

http://www.shell.com/global/aboutshell/major-projects-2/pearl/overview.html

[bestintxas]

“It is why companies like Shell built the GTL after the LNG facilities were already up and running in Qatar. Both were spending capital to build facilities to buy local natgas and export to another country. If there was greater profits to be made in LNG, I expect that they would have built that instead. With two other commercial GTL facilities, they had already proved their process and economics.”

When I recall Bintulu GTL being built, it was representing a small-scale “test” of GTL as it had never been commercialized prior to that time. Shell’s LNG was up and running an very profitable but LNG had reached virtual saturation conditions so Shell had difficulty in building more LNG trains and instead tried to see if GTL could create new markets, since Shell still had access to the cheap Brunei gas.

Their target was the high-end industrial users who needed very high quality product. Since Fischer-Tropsch essetially rearranged the hydrocarbon atoms in order to turn natural gas into kerosene, gasoline, naptha, or whatever, the product was essentially contaminant-free.

So GTL followed LNG as GTL was a lot more complicated and needed new markets, whereas LNG industry was simply supplying gas via liquefaction instead of pipeline.

Both need sources of very cheap raw feed.

BTW, I read somewhere that as a grassroot endeavor, the GTL never made the economics, and is now only profitable if opcosts are considered, no capital included.

[thackney]

Bintulu was a commercial test, could it be scaled up to commercial size economically.

But I don’t believe 15 years after Bintulu, they spent $18~19 billion as another test.

[bestintxas]

“Bintulu was a commercial test, could it be scaled up to commercial size economically.

But I don’t believe 15 years after Bintulu, they spent $18~19 billion as another test.”

That’s a lot of money to bet so yes, I would agree on that statement.

A long-term approach here would be to undertake more GTL in this country as our unconventional supply of natural gas will enable us to procure the liquids we need, particularly for the transportation and lubricant sectors.

We will have difficulty on the feedstock cost, however, as we will be expensive on gas (at least $5/mmbtu) required to drill these gas resources, compared to the other countries that have the cheap($1-2/mmbtu) supplies.

But we will need it to keep our standard of living high enough and not be subservient to countries which are not our friends.