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Gas to Liquids in US

June 4, 2013

Converting natural gas to liquids, essentially diesel fuel, has been used where natural gas was stranded, such as in Qatar.

The Fischer-Tropsch process was originally developed in Germany and, using gasified coal, produced the fuel on which German tanks ran during WWII.

SASOL used this process in South Africa when it was cut off from oil by sanctions, to produce diesel fuel from coal. After the sanctions were lifted, SASOl developed installations, such as in Qatar, to produce liquids from natural gas.

Shell also developed Gas-To-Liquid (GTL) plants, in Borneo and, the largest, in Qatar.

Now, SASOL is issuing contracts to build a $16 – $21 billion GTL plant in Louisiana. (The plant will also produce other chemicals such as ethane.) Initial output on completion of the first phase would be 48,000 barrels per day of diesel fuel, plus ethane.

There will now be two competing alternatives for displacing crude oil, i.e., diesel fuel, from the long haul trucking, transportation market.

  • Using LNG to replace diesel fuel for long haul trucks.
  • Using diesel fuel produced from the GTL process.

In my view, the most likely outcome will be that LNG captures the long haul trucking market because of cost savings.

The SASOL GTL plant in Louisiana will therefore produce diesel fuel for export, probably to Europe.

There are, however, intriguing possibilities for using GTL diesel fuel in the United States: GTL diesel has very low sulfur content, < 5 ppm, thereby meeting the EPA’s Ultra Low Sulfur content requirement for diesel fuel of less than15 ppm.

Two opportunities come to mind:

  • Use GTL diesel in diesel powered locomotives.
  • Use GTL diesel in off-highway equipment, such as large mining and earth moving equipment.

Interestingly, there is an effort underway to build mini-GTL plants requiring a fraction of the SASOL investment.

UK-based Oxford Catalysts Group is, for example, though its US subsidiary Velocys, pursuing this opportunity. Their proposal is to build plants that cost $100 million to produce 1,000 barrels of diesel fuel per day.

Another company involved with mini-GTL plants is Compact GTL, in the UK.

The motivation behind mini-GTL plants is that many natural gas sources around the world are too small to support a SASOL sized facility. There could, therefore, be opportunities in other countries for mini-GTL plants.

In the US, it has been suggested that the plants could take advantage of the gas currently being flared.

Flared gas, however, will likely be absorbed by LNG technology.

My article on the size of the United States natural gas supply under various scenarios, (see Do We Have Enough Natural Gas) did not include the use of natural gas for GTL.

For GTL, the required quantity of natural gas for this single facility, i.e., SASOL Louisiana, would be around 0.2 Tcf per year, and would, therefore, have little effect on our supply of natural gas … even if SASOL doubled its output, or several similar facilities were built.

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