Gas To Liquids, Can We Afford It?

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Sasol Ltd, an oil and chemical with a proven process to convert coal to liquid fuel, is preparing a study on converting natural gas to diesel inside the USA. The plant could cost up to $10 billion and the process is very dirty.

Sasol said last week they were going to do an 18-month study on building a plant in Louisiana to convert gas to diesel. The process has been proven in the past but never on the scale needed to make it worthwhile in the USA.

The plant would be built on land next to an existing Sasol chemical facility in Calcasieu Parish, LA.

If the study proves to be successful it would be the first commercial gas to liquids plant in the USA. Sasol's managing director stood with Louisiana's governor, Bobby Jindal, at the Louisiana complex when the project was announced.

The project could work in the USA because our gas prices are in the $3-$6 range where gas is in double digits in many parts of the world. Sasol would buy gas from suppliers using long term contracts to avoid the spikes. They would convert the gas to a form of diesel and sell the fuel to the refiners and blenders who would then sell the finished fuel into the market.

Sasol said the cost to build a plant that would produce about 96,000 bpd of fuel would cost about $10 billion to build.

By converting gas to a liquid they hope to avoid the problems facing Boone Pickens in getting natural gas accepted as a fuel for trucks. The Pickens Plan is fighting an uphill battle because of the need to build out a natural gas supply system that follows the interstate highways to allow trucks to fill up at truck stops.

Sasol partnered with Qatar Petroleum to open a 34,000 bpd gas to liquids plant in 2006. That plant is working at full capacity. However, Sasol is having problems with a similar plant in partnership with Chevron in Nigeria because of extreme cost overruns.

The process is not cheap and it is polluting. Several studies have been done suggesting that gas to liquids was a dirty process even more so than crude oil refining. There is no secret sauce that provides the answer to every peak oil problem. As oil prices continue to rise I am sure we will see more GTL projects but at $10 billion for a 96,000 bpd plant that is a major expense and the resulting fuel is not going to be cheap but can we afford not to do it?

Jim Brown