Gas-to-Liquids: No Longer a Footnote for the Upstream Industry
Small-scale Gas-to-Liquids (GTL) solutions are poised to enable access to more than 50 billion barrels of oil equivalent: more than Libya's total oil reserves. Long a highly niche sideshow of the energy business, GTL now has the potential to enter center-stage.
GTL technology owes its intellectual heritage to exceptional historical circumstance. Pioneered by Nazi Germany to meet oil shortages, the Coal-to-Liquids process – GTL's predecessor – was further developed by a South African Apartheid regime enduring heavy sanctions. The process created synthetic gas from coal before producing longer-chain liquid hydrocarbons via the Fischer-Tropsch process. GTL replaces coal with natural gas as the feedstock.
The theme of exceptional circumstance has remained crucial for GTL. A facility requires scale to access favorable economics. It therefore needs plentiful, inexpensive natural gas reserves to exploit. It also requires a demand market for petroleum products – predominantly diesel – where prices are strong.
According to London-based research firm Visiongain, the price of oil needs to be at least 15 times the price of gas to make GTL a viable prospect. As a result, GTL facilities are a rare breed and only four such facilities are currently in operation: Mossel Bay (South Africa), Bintulu (Malaysia), Oryx (Qatar) and Pearl (Qatar). Later this year a fifth, the much delayed and over budget Escravos facility in Nigeria, is due to open.
Oryx, Pearl and Escravos represented a second wave of large-scale GTL construction. A third wave is now on the horizon, with optimistic outlooks seeing six additional facilities as probable over the next 10 years: an arbitrage opportunity between gas and liquid hydrocarbon prices in North America – thanks to the exploitation of shale rock – has created the exceptional circumstance GTL requires.
But small-scale GTL will put an end to this theme of exceptional requirement.
The Promise of Small-Scale Gas-to-Liquids
By removing the 'economies of scale' requirement, smaller scale GTL solutions require far less natural gas (small-scale GTL solutions produce less than 10,000 bpd and consume approximately 10 million British thermal units for each barrel they produce). The result is a truly remarkable increase in the number of natural gas sources viable for GTL exploitation. Stranded and associated natural gas become targets, as liquefying them provides the hydrocarbons with market access.
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