• 7 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 8 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 9 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 9 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 10 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 11 hours VW Fails To Secure Critical Commodity For EVs
  • 12 hours Enbridge Pipeline Expansion Finally Approved
  • 13 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 13 hours OPEC Oil Deal Compliance Falls To 86%
  • 1 day U.S. Oil Production To Increase in November As Rig Count Falls
  • 1 day Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 1 day Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 1 day EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 2 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 2 days Aramco Says No Plans To Shelve IPO
  • 4 days Trump Passes Iran Nuclear Deal Back to Congress
  • 4 days Texas Shutters More Coal-Fired Plants
  • 4 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 4 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 5 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 5 days Renewable Energy Startup Powering Native American Protest Camp
  • 5 days Husky Energy Set To Restart Pipeline
  • 5 days Russia, Morocco Sign String Of Energy And Military Deals
  • 5 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 5 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 5 days India Needs Help To Boost Oil Production
  • 5 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 6 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 6 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 6 days District Judge Rules Dakota Access Can Continue Operating
  • 6 days Surprise Oil Inventory Build Shocks Markets
  • 6 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 6 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 6 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 7 days Oil M&A Deals Set To Rise
  • 7 days South Sudan Tightens Oil Industry Security
  • 7 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 7 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 7 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
Saltanat Berdikeeva

Saltanat Berdikeeva

Saltanat Berdikeeva is an energy consultant based in Washington DC. A native of Kyrgyzstan, Ms. Berdikeeva received her master's degree in security studies at Georgetown…

More Info

Can Qatar's Success with Gas-to-Liquids Fuels Be Repeated in the U.S.?

Depressed natural gas prices in the U.S. since 2009 and anticipated low price levels for many months, if not years, to come, due to a glut from booming shale gas production, generated discussions in the U.S. about exporting gas in a form of liquefied natural gas (LNG). Given the record cheap natural gas prices in the U.S., which have been hovering around $3/million British thermal units since 2010, South African Sasol and Royal Dutch Shell began eyeing the U.S. to monetize its gas potential through gas-to-liquids (GTL) technology. And the U.S. Department of Commerce, through its Select USA program, seems to be open to realizing the potential.

The GTL process involves conversion of natural gas to higher-valued petroleum distillates, such as diesel, naphtha, and lubricant base oils. Diesel from GTL is high quality and lacks aromatic hydrocarbons and generates lower emissions when burned. Some energy analysts see the strong and growing demand for diesel products as a permanent trend in the U.S. and the world. Because of its efficiency for producing synthesis liquids and lower level of impurities, natural gas is a valued feedstock for GTL.

Sasol and Shell are the world leaders in commercial GTL production in Malaysia, Qatar and South Africa. While Shell officials said that the company was still a couple of years away from making a final decision on a GTL plant in the U.S., South African Sasol announced in December 2012 about its plan to build America’s first commercial GTL plant in Louisiana, which would begin production in 2018. According to Sasol, the Louisiana plant would produce 96,000 barrels of fuel and it will be the second-largest GTL plant in the world after Shell’s Pearl plant in Qatar. Sasol chose Louisiana due to its closeness to prolific shale gas fields in neighboring states.

Related article: Barnett Shale Formation Forecast to be a Major Contributor to US Natural Gas

Tapping the record low natural gas prices, which in the U.S. are not linked to price of crude oil or oil products, GTL seems to make sense to the country that has been awash with cheap shale gas for several years. Plus, costs of commercial GTL production have come down due to improvements in catalyst life, efficiency and Fischer-Tropsch reactor design. The catalytic chemical reaction called the Fischer-Tropsch process is at the core of the GTL production.

Commercialization of GTL is prominently evidenced in Qatar’s giant Pearl GTL plant, which has produced 5.7 million tonnes of GTL products and natural gas liquids (NGL) through the third quarter of 2012. Qatar embraced GTL as a way to diversify its gas export products from LNG.  Given that natural gas used by Pearl was basically provided for free by Qatar and Brent crude sold for more than $110, economics of building Pearl was in Shell’s favor.

However, cost escalation of Pearl GTL, with a capacity of 140,000 barrels per day (bpd) of GTL, made it one of the most expensive GTL projects to date and the plant remains emission-intensive. Shell’s initial cost estimates for Pearl was $5 billion, which increased to $19 billion towards the completion of the plant and it has not operated at full capacity due to unexpected maintenance problems. Construction of the cheapest GTL plant in Qatar, Oryx, with production capacity of 34,000 bpd, cost $1 billion. It is estimated that about 40 percent of the energy of natural gas is lost in the GTL process with a massive associated production of carbon dioxide. According to a 2008 study by Carnegie Mellon, Qatar’s GTL production “generated 20 to 25 percent more carbon emissions than conventional petroleum-based liquid fuels because the production process consumed so much energy.”

Related article: How Far Will the US Go to Derail Iran-Pakistan Pipeline?

GTL will face the same set of issues in the U.S. and its future there could be less certain. Even if Sasol builds the plant in Louisiana, GTL is likely to remain a marginal industry in the U.S., given the high capital costs, carbon emissions and greater uncertainty about the long-term price of natural gas in the U.S. According to Sasol’s revised December 2012 estimates, the cost of the Louisiana GTL project has already jumped up to $11-$14 billion from the company’s September 2012 estimate of $8 billion. The high price tag of GTL plants is largely due to capital costs of building GTL facilities. Even with $2 billion worth of tax credits and other incentives from the state of Louisiana, the final cost of the project may be higher, if Qatar’s Pearl plant is any evidence. In the case of Pearl, Shell took all the development costs and had the full support of the Qatari government to build the plant. It is still unclear whether Sasol will have the same conditions in the U.S.

More importantly, the prices of natural gas and crude oil are major factors for justifying construction of a GTL facility. Some energy observers stress that at least a 25-year period of low natural gas prices is needed to support high capital costs of GTL. Despite the gas glut, predicting U.S. natural gas prices are a harder bet than those of Qatar. Because the price of natural gas in Qatar is based on regulation below cost (i.e. subsidization) and the gas price in the U.S. is completely deregulated, there is much less certainty that low natural gas prices will be maintained in the U.S. for an extended period of time once the glut is absorbed.

Lastly, environmental concerns about carbon emissions from GTL are likely to generate more resistance to a wider application of this technology in the U.S., particularly given President Barack Obama’s fresh pledge to tackle climate change. Given that the U.S. has been looking into exporting its natural gas in the form of LNG, which uses much less energy than the GTL process, there is a less expensive option for the U.S. to market its gas.

By. Saltanat Berdikeeva

Back to homepage

Leave a comment
  • Ronald Wagner on March 13 2013 said:
    Great article. LNG is liquid fuel. It is a nearly perfect fuel, and it makes more sense to convert our large fuel burning engines to CNG or LNG. It is one eighth the price, at wholesale, of diesel and gasoline. The Sassol process is motivated by a desire to maintain the high price of fuel. We should focus on expediting the process of converting all large engines to CNG or LNG. A class 8 CNG truck, with two tanks, has a 500 mile range. That is a full days driving! It fills up about as quickly as a diesel truck. Ships, locomotives, and stationary engines all run on CNG or LNG. Boeing has the "Sugar Freeze" plan for a purpose built LNG aircraft.
    Nothing can compete with natural gas.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News