Synthetic fuels that have natural appeal

by Carola Hoyos

Almost 100 years after Franz Fischer and Hans Tropsch figured out how to squeeze synthetic fuels from coal, the world's biggest energy companies are pouring billions of dollars into using the same method to get diesel from natural gas. In the past six months South African-based Sasol, Shell, the world's third largest energy group, and ConocoPhillips of the US have announced gas to liquids (GTL) projects in Qatar worth more than $ 10 bn.
GTL is the process by which methane, natural gas's main component, is turned into synthetic gas, which is then turned into condensates and waxy synthetic crude before being upgraded to diesel and naphtha. The product contains almost no sulphur, which poisons the tailpipe equipment that reduces diesel's toxins, or aromatics, potentially carcinogenic toxins.

The resulting clear and odourless liquid is so "clean" that one expert said you could drink it without much more effect than eating a large packet of prunes. More importantly to the success of the product, GTL can be poured directly into a modern diesel engine.
"We can use the existing infrastructure completely, from pipelines to tankers to gasoline stations," says Patrick Davies, executive director at Sasol, which became a leader in GTL technology after it perfected the Fischer/Tropsch method to create fuel for coal-rich South Africa, which was barred from importing oil under apartheid.

GTL is a tiny part of the industry today, with less than 50,000 bpd of production. But that number is expected to increase tenfold in the next decade. GTL can be used in niche markets, such as the Paris bus fleet to improve the city's pollution problem, or to run equipment in mines, where air quality for workers is particularly important. But the largest market for GTL is among refiners, which use the product to upgrade lower-quality crude oil products as they try to meet tightening environmental standards without overhauling ageing refineries.
For many years, following Shell's expensive forayinto a plant in Malaysia, analysts questioned whether GTL was economically viable. But with demand for diesel growing 3-5 % a year and environmentally conscious governments pushing for lower emissions, the time for GTL appears to have finally arrived, analysts say. Costs have also come down. Mr Davies points out that in the past two years Sasol's improved technology coupled with better economies of scale have reduced the cost of building a GTL plant by nearly 30 %.

The price tag has fallen from $ 35,000 for every barrel of capacity installed to $ 25,000 and the company expects a further decrease to $ 20,000 within four years. In comparison, Shell's Malaysian plant was said to have cost the company $ 50,000 a barrel of capacity and remains commercially unviable, analysts said.
Rajnish Goswami, consultant at WoodMackenzie, an independent Edinburgh consulting firm, says: "This is companies putting their money where there mouth is. The experience of the past six months clearly demonstrates that the technology progress has been on right lines and that there is an enormous comfort factor in the industry and the financial world."

Perhaps most important to big international energy companies, GTL is a vehicle to replace the reserves of oil and natural gas produced each year. It allows companies to "book" barrels by convincing the Securities and Exchange Commission that they can make money from their gas reserves, says Mr Goswami.
He adds that Shell would most likely not have done its $ 5 bn deal in October if it had not been able to add the barrels to its dwindling reserves number, which is closely watched by analysts measuring the health of any international oil company. "The integrated nature of the project is one of the key drivers for GTL investments," he says.

The GTL project ChevronTexaco is mulling with Sasol in Nigeria is driven by yet another factor: the environmental penalties for flaring unwanted gas into the atmosphere.
And as Sir Philip Watts, chairman of Shell, is quick to point out, by investing in a GTL plant, companies scrutinised by environmental groups can argue that they are investing in cleaner-burning alternatives to gasoline and diesel.