Replies to post #1895 on The Rising Influence of Rising Affluence

[zebra4o1]

Was surprised to learn that another growing use of gas as a transporation fuel is as LNG. On a recent GTLS (Chart Industries) conference call heard that one of their fastest growing markets is LNG systems for heavy duty trucks. That's right, LNG, not CNG. LNG gives trucks much greater range (compared to CNG). There are plans for converting the giant fleet of trucks carrying coal from north east China and Mongolia to LNG, converting city buses, and also converting Yangtze River cargo ships. Was fun to hear CEO talk about your average midsized Chinese city of 6 to 8 million, with a municipal bus fleet of 30,000 buses.

Believe that converting to LNG takes about 15% of the initial energy. Not sure how that compares to gas to liquids. Should also look into how the capex compares. Making LNG has got to be much cheaper.

If gas stays cheap people are going to find lots of ways to use it.

[DewDiligence]

Sasol Studies Louisiana GTL Facility

[If constructed, the output from the plant will be mostly diesel with some naphtha and propane.]

http://online.wsj.com/article/SB10001424053111904353504576568872584676488.html

›SEPTEMBER 14, 2011
By BEN LEFEBVRE

HOUSTON—Sasol Ltd., a chemical company long known for squeezing motor fuel out of coal, is now turning its sights on the glut of natural gas in the U.S.

South Africa-based Sasol on Tuesday announced plans to build a plant in Louisiana, at a cost of up to $10 billion that would convert natural gas into diesel fuel for trucks and other vehicles.

The company's board last week approved an 18-month feasibility study for the project, which would be constructed on land adjacent to Sasol's existing chemical facility in Calcasieu Parish, La.

If given the final go-ahead, the plant would be the first in the U.S. to use "gas-to-liquids" technology. Once seen as futuristic, the technology has gained traction in recent years as discovery of gas supplies have outpaced that of oil.

"The initial numbers look positive," said Ernst Oberholster, Sasol's managing director of new-business development, who stood alongside Louisiana Gov. Bobby Jindal at the company's Louisiana complex when the decision was announced.

What makes the U.S. an attractive location for such a project is the low level of natural-gas prices in the country [duh]. Benchmark futures have hovered between $3 and $6 per million British thermal units for two years, well below prices paid by consumers in Europe and Asia.

Sasol would buy the natural gas from suppliers using long-term contracts, convert the gas to liquid fuel and then sell that fuel to blenders, who would then sell it for the open market.

The project is the latest to address what to do with a surplus of natural gas caused by the boom in drilling in shale-rock formations in places like Texas and Pennsylvania. Energy investor T. Boone Pickens and natural-gas producers such as Apache Corp. have promoted the use of natural gas as a road-transportation fuel, one that would be cleaner burning than oil-based alternatives. In addition, some companies have put forward plans to export gas out of the U.S. in cool-liquefied form.

Sasol's idea is one of the most ambitious, because it would essentially put natural gas on par with higher-priced crude oil as a key raw material for transportation fuels. And diesel prices trickle down into the cost of consumer goods everywhere because the fuel is mainly used in trucking. So far this year, retail diesel prices in the U.S. are up 16%, even as the economy grows more fragile.

Sasol officials estimate that a plant producing 96,000 barrels a day of diesel, and some jet fuel, would cost $10 billion to construct. They say they could opt for a smaller facility, however.

By converting natural gas into a liquid, the fuel could be used without retrofitting vehicles or creating new fueling infrastructure, an issue that would affect motorists using compressed natural gas as Apache and Mr. Pickens have advocated. The proposed site in Louisiana is close to Gulf Coast natural-gas fields and is crisscrossed by pipelines that could be easily linked to a new facility, Mr. Oberholster said.

Based in Johannesburg, Sasol is the world's biggest producer of motor fuels from coal, a business begun in 1950 after apartheid-era embargoes barred the selling of crude to South Africa.

Gas-to-liquids technology hasn't yet gone mainstream, and past projects have a mixed record. [I would take issue with the non-mainstream qualifier insofar as Shell has begun operating the Pearl GTL plant in Qatar, which is the largest hydrocarbon project in the world (#msg-61293785).] There are many obstacles to the Louisiana project, including getting environmental permits and financing the potential $10 billion cost.

Sasol joined with Qatar Petroleum to open the 34,000 barrel-a-day Oryx gas-to-liquids, or GTL, plant in 2006. That plant is operating at planned rates; however, it has had more trouble with another GTL project developed jointly with Chevron Corp. and the state oil company in Nigeria after disclosures of cost overruns at the project.

But if natural-gas prices remain at current levels and U.S. crude oil continues to remain near $100 a barrel, the odds that some form of natural-gas fueling technology will catch on should improve, said Sander Cohan, principal at energy-analysis firm ESAI Inc.

"With high crude prices, the economics of gas-to-liquid fuel have started to look much better," Mr. Cohan said.‹