31 March 1998

Arthur D. Little, Inc., (ADL), a global consulting firm, has completed a study on gas-to-liquids (GTL) technology which converts natural gas to environmentally friendly liquid fuels, primarily diesel, naphtha and kerosene. The study shows that three quarters of a century after development of the original Fischer-Tropsch process, recent technological improvements and operational experience have finally made GTL an attractive alternative to the traditional ways of commercializing remote natural gas, i.e., liquefaction (LNG) and pipeline gas. "GTL will revolutionize the gas industry the way the first LNG plant did about 40 years ago," predicts Tim Partridge, VP of ADL Canada, who directed the study.

"We expect to see a 1-2 million barrels per day GTL industry evolving over the next 15-20 years to the tune of 25-50 billion dollars of investment," estimates Partridge. And that's just a fraction of the potential 11 million barrels per day of GTL capacity that could be built based on known economic gas reserves. The impediments to the rapid realization of the full potential of GTL are low oil prices, market barriers, contractor capacity limitations, and technology risks. "On balance, GTL commercialization is likely to provide both important new opportunities and challenges to contractors, as well as technology providers, producing countries, oil companies, equipment manufacturers, consuming countries, and refiners/marketers," the study finds.

What's so great about GTL? "To begin with, GTL can provide high-quality, sulfur-free petroleum products in an era of increasing environmental concerns, " says Johannes Thijssen, a Senior Manager at ADL and study co-director. In addition, it has advantages because its liquid products can be easily transported and sold as commodities on world markets. "That's much more efficient than the traditional means of commercializing stranded gas, which require complex interlocking contracts to reduce volume risk, as well as inflexible physical infrastructure. And as commodities, GTL products can be brought to market earlier than traditional alternatives," explains Thijssen.

ADL's study analyzes the three leading GTL technologies (Exxon, Sasol, and Shell) at plant output sizes ranging from 5 thousand to 100 thousand barrels per day in eleven gas-rich locations around the world. It concludes that all three are both technically viable and economically competitive at plant capacities exceeding 50 thousand barrels per day in locations with low construction costs and natural gas costs. "Scale (the bigger the better), location, and gas price are the keys to success," comments Tim Partridge, "and the combination of these factors points to the Middle East, Russia, and parts of Latin America as the most attractive places for GTL projects."

Commercialization of GTL technology will be profoundly affected by the licensing strategies of technology owners. Currently, a number of oil and gas companies are pursuing their own R&D, or are appraising third party technologies, but few are willing to license. This means that industry players without GTL technology will need to find partners or accelerate internal R&D. The good news is that, as with any important new technology, new technical improvements are likely to occur and will further enhance GTL attractiveness.

The study is available for purchase by contacting Tim Partridge, Arthur D. Little, 416-361-1051.

Source: Business Wire