Gas-to-Liquid Technologies: Recent Advances, Economics, Prospects

26th IAEE Annual International Conference PragueJune 2003 Iraj Isaac Rahmim, PhD E-MetaVenture, Inc. Houston, Texas, USA

Copyright 2003 by E-MetaVenture, Inc. All Rights Reserved.

Gas-to-Liquid Technologies:
Presentation Outline Drivers for use of GTL technology Historical, current, and planned GTL applications GTL chemistry, processes, products Key GTL technologies GTL CAPEX and economics Synergies and commercial issues

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Drivers for Chemical Conversion of Natural Gas using GTL

Need for economic utilization of associated gas Desire to monetize significant reserves of non-associated and, particularly, stranded natural gas 80% of the 5,000 TCF proven NG reserves are stranded Reduction in cost of transport of NG from producing to consuming regions (same principle as with LNG) Environmental concerns The development of clean fuels regulations throughout the world (gasoline, diesel, fuel oils) (Aside: GTL can be combined with gasificationcoal, bitumen, petroleum coke)

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Brief GTL History

1922: Franz Fischer and Hans Tropsch used iron-based catalyst to convert an CO/H2 mixture to mixture of HCs and oxygenated compounds 1925: used both iron and cobalt-based catalysts to synthesize HCs WW II: chemistry contributed ton Nazi Germany war effort 1950s-1990s: South Africa SASOL developed F-T commercially (in conjunction with coal gasification) to convert coal to HCstotal capacity 4,000,000 MT/year in three plants; two still in operation 1980s-present: Shell using F-T to convert NG to fuels and waxes in Bintulu, Malaysiarecently increased wax capacity to approx. 500,000 MT/year along with diesel, gasoline, etc. 1980-present: a number of entrants into the fields, a number of projects announced and planned (including demonstration projects), Qatar and Nigeria have started design and construction on worldscale GTL facilities E-MetaVenture, Inc. 4

4.1 TCF Natural Gas Flared in 2000

Excluding FSU
Region Africa Middle East Central and South America North America Far East Europe BCF Flared 1,640 923 569 524 296 148

After A. D. Little, Inc. Study (2000) E-MetaVenture, Inc. 5

Stranded NG Fields in the World

From ConocoPhillips web-site E-MetaVenture, Inc. 6

Natural Gas Transport Mechanisms

PRODUCTION/PROCESSING
Gas Well Field Processing

TRANSPORTATION
Gas Pipeline

DISTRIBUTION

Liquefaction

Storage, Regasification, Transfer Storage, Transfer

Chemical Conversion (incl. GTL) Electrical Conversion

LPG Storage and Transfer

Storage, Transfer

C5+ Storage and Transfer

Storage, Transfer

After Natural Gas Production, Processing, Transport by Rojey et al. E-MetaVenture, Inc. 7

Key US and EU Sulfur Specifications

DIESEL US EPA EU
2005 50(1) (2) 57 (#)

World Wide Fuel Charter

Category 4 10 52/55 (#)

Implementation Date Current 2006 Current Sulfur, wppm Cetane Index

500 40 15 40 350 51 (#)

GASOLINE/PETROL Implementation Date Corporate Annual Average Per Batch Cap

US EPA (3)
2004 120 300 2006 30 80 150

EU
Current 2005

50

(1) Down to 10 wppm (sulfur-free) in 2004 (2) Many members have tax incentives to reduce sulfur to 10 wppm (3) Sulfur specs are phased in over time with full implementation by 2008

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Diesel Sulfur Specifications in Select Countries

Australia Hong Kong India (Delhi) Japan Mexico Republic of Korea Year 2006 Under Consideration Current Current/2005 Current 200 Max Sulfur, wppm 50 50 500 500/50 500 130 Max (2002)

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Gasoline Sulfur Content in Select APEC Countries

Australia China Hong Kong Indonesia Japan Malaysia Republic of Korea Philippines Singapore Taiwan Thailand E-MetaVenture, Inc. 2000 Sulfur, wppm 150 Ave 1000 Max 500 Max 2000 Max 100 Max 1500 Max 200 Max 1000 Max (Unleaded) 130 275 Max 900 Max 2005 Sulfur, wppm

150 Max 30-50 Max (?) 130 Max (2002)

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GTL Projects2001

From Gaffney, Cline & Associates study (May 2001) E-MetaVenture, Inc. 11

Key Commercial GTL Plants

Company Sasol Mossgas Shell Location Size (BPD) Comments South Africa 124,000 1955; Light olefins and gasoline South Africa 22,500 1991; Gasoline and diesel Malaysia 20,000 (12,500 pre-1997) 300 400 1993; Waxes, chemicals, diesel; recently revamped

Demonstration Plants BP Alaska ConocoPhillips Oklahoma

Start-up 1Q2003 Start-up 1Q2003

In Engineering and Construction Sasol Chevron Nigeria 34,000 Sasol ConocoPhillips E-MetaVenture, Inc. Qatar (Oryx GTL) 33,700

2006 completion; FW; $1,200 MM 2006 completion; TechnipCoflexip; $850 MM 12

A Number of Other GTL Plants are at Study or Planning Stage

Location Argentina Australia Australia Bolivia Chile Egypt Iran Technology Shell Shell Syntroleum Size (BPD) Comments

Shell

Peru Syntroleum Qatar ExxonMobil South Africa Statoil (?)

11,500 10,000 10,000 75,000 70,000+ 40,000 5,000 100,000 1,000

Est. budget~$600 mil.

Est. budget~$1,700 mil.

Total of 45-55 with projected 1.3-2 MBD of liquid product E-MetaVenture, Inc.

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Conceptual Routes for the Chemical Conversion of Methane

Thermal Coupling Direct Route Oxidative Coupling CO2, H2, N2 Methane Ammonia-Urea Synthesis Ammonia/Urea Steam Cracking Hydrogenation Olefins Oligomerization Olefins Gasoline

Indirect Route

Synthesis Gas Production

MethanolAlcohol Synthesis

Methanol and Higher Alcohols Gasoline Production Gasoline

FischerTropsch Reaction

Diesel, Gasoline, Wax, Lubes

After Natural Gas Production, Processing, Transport by Rojey et al. Problem: methane is stable Commercial routes: methanol, Fischer-Tropsch products E-MetaVenture, Inc. 14

Key Steps in GTL Process

Gas Separation and Purification

Syngas Production

FischerTropsch Process

Product Upgrade

Methane

Methane, Oxygen, Steam

CO, Hydrogen

n(CH2)--, Water

Liquid Fuels

Includes air separation

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GTL Chemistry
Production of synthesis gas (syngas) occurs using either partial oxidation or steam reforming Partial oxidation: CH4 + 1/2 O2 CO + 2 H2 (exothermic) Steam reforming: CH4 + H2O CO + 3 H2 (endothermic) Other possible reactions: CO + H2O CO2 + H2 CH4 + CO2 2 CO + 2 H2 Fischer-Tropsch synthesis CO + 2H2 CH2 + H2O (very exothermic)
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More on Partial Oxidation Synthesis Gas Production

CH4 + 1/2 O2 CO + 2 H2 Combustion chamber at high temperature (1200-1500C); no catalyst Some key vendors: Texaco, Shell Main competing reaction: decomposition of methane to carbon black (due to high temperature, non-catalytic nature of the chemistry) Three process sections: Burner section where combustion occurs (with oxygen to avoid presence of nitrogennitrogen is desirable only when making ammonia) Heat recovery section Carbon black removal section: first by water scrubbing, then extraction by naphtha from the sludge E-MetaVenture, Inc.

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More on Steam Reforming Synthesis Gas Production

CH4 + H2O CO + 3 H2 Carried out in the presence of catalystusually nickel dispersed on alumina support Operating conditions: 850-940C, 3 MPa Tubular, packed reactors with heat recovery from flue gases using feed preheating or steam production in waste heat boilers New process combines steam reforming with partial oxidationuses the heat produced from partial oxidation to provide heat for steam reforming; resulting combination is autothermic Developed by Socit Belge de lAzote and Haldor Topse (ATR process) Gases from partial oxidation burner are mixed with steam and sent to the steam reformer

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More on Fischer-Tropsch
CO + 2H2 CH2 + H2O (very exothermic) Competes with methanation (reverse of steam reforming) which is even more exothermic: CO + 3 H2 CH4 + H2O To promote F-T over methanation, reaction is run at low temperatures: 220-350C; pressure: 2-3 MPa Catalysts Operating conditions and chain growth Reactor types

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Iron v. Cobalt-Based F-T Catalysts

Key catalyst types: iron or cobalt-based (though cobalt-based is becoming more common in new applications) Cobalt is poisoned by sulfursyngas is desulfurized to about 0.1 ppmv S Issue of stoichiometric ratios of H2 and CO

From Van der Laan (1999) E-MetaVenture, Inc. 20

MW Distribution in Raw FT products

Degree of chain growth (MW distribution of products) is affected by operating condition, reactor design, catalyst selectivity, and contaminants such as sulfur and oxygenated compounds

From Natural Gas Production, Processing, Transport by Rojey et al. E-MetaVenture, Inc. 21

Fixed-Bed FT Reactors

From Natural Gas Production, Processing, Transport by Rojey et al.

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Moving-Bed FT Reactors

From Natural Gas Production, Processing, Transport by Rojey et al.

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Comments on GTL Products

All white oil or high value lube/wax products No bottom of barrel GTL Diesel likely to be used as blendstock and not separate fuel EP590 spec. issues Separate distribution chain cost prohibitive Small markets for lube and oil (e.g., total global wax market ~ 70 MBD) Overall emissions per barrel upon consumption similar to crude oil Example: 1021 lb/CO2 v. 1041 GTL-FT emissions shifted to plant site (v. city)

(Typical Products) LPG Naphtha + Gasoline Distillates Fuel Oils Lubes + Wax

Refined Brent (vol%) 3 37 40 40

GTL-FT (vol%)

15-25 50-80

0-30

After BP study (Euroforum, Feb. 2003)

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Some Key GTL Technologies

Nearly all have three key steps: syngas production, F-T hydrocarbon synthesis, waxy intermediate upgrading to lighter (D, G) products Differences relate to reactor design and catalyst technology Sasol Chevron: South Africa plants have used Lurgi coal gasifiers to produce syngas and multitubular fixed-bed (3 MBD) and fluidized-bed reactors (110 MBD circulating, 11 MBD non-circulating) for the F-T step Jointly have access to the Texaco gasifier Developed slurry-phase distillate process (SSPD) with cobalt catalyst in 1990s Combined with Chevron product upgrading technology and partial oxidation syngas F-T designs tested and commercially available include circulating fluid bed (Synthol), multitubular fixed-bed with internal cooling (Arge), non-circulating fluid bed reactores (SAS), as well as SSPD Have contracts for Nigeria and Qatar (Sasol ConocoPhillips) E-MetaVenture, Inc. 25

Some Key GTL Technologies (2)

Shell: Partial oxidation based syngas manufacture Multi-tubular fixed trickle bed reactors (SMDS) Recently expanded Bintulu after S/D due to air separation explosion (1997) Possibilities: Argentina, Australia, Egypt ExxonMobil: AGC 21 includes fluidized syngas production (catalytic partial oxidation) coupled with slurry-phase bubble-column F-T and hydro-isomerization of waxy product Primarily cobalt and ruthenium-based catalysts 200 BPD GTL pilot plant operated in Baton Rouge since 1996 Possibility: 100,000 MBD in Qatar

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Some Key GTL Technologies (3)

ConocoPhillips: Catalytic partial oxidation syngas production process Proprietary F-T catalyst and high efficiency reactor design Ponco City, OK demonstration plant in start up (1Q2003) Have Qatar joint contract with Sasol BP: Compact steam reformer (1/40th conventional in size) Fixed bed F-T with more efficient catalyst Wax hydrocracking Alaska demonstration plant in start up (1Q2003) Eye towards ANS natural gas conversion and transportation through TAPS

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Some Key GTL Technologies (4)

Syntroleum: Small OK-based technology firm; offers for licensing Uses nitrogen in air to remove heat from syngas production (called ATR: autothermal reformer) does not need air separation unit Reduced capital cost Fixed-bed or fluid-bed F-T (using cobalt-based catalyst) followed by hydrocracking Rentech: Small Colorado company; offers for licensing Formerly had strong working agreement with Texaco (with access to the Texaco gasifier) Combined partial oxidation and SMR for internal heat balance Iron-based catalyst and slurry phase process Iron-based catalyst is less active than cobalt-based, but is more versatile and can process syngas from SMR, solid gasifiers (coal), or liquid gasifiers (refinery resids) Sasol also offers iron-based F-T E-MetaVenture, Inc.

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GTL-FT CAPEX Reduction Due to Improved Technology

Total Installed Cost ($/B)
140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1950 1960 1970 1980 Year 1990 2000 2010

Capacity differences Lube and wax manufacture v. no lube/wax Financing structure Short-term v long-term (increased capacity) case Technology differences E-MetaVenture, Inc. 29

Economic Analysis of Some Key Proposed GTL Cases

Exxon Mobil Short-Term Case Liq. Yld (BPD) TIC ($MM) TIC ($/B) IRR (%) Long-Term Case Liq. Yld. (BPD) TIC ($MM) TIC ($/B) IRR (%) Shell Sasol 15,300 395 25,800 14.5 Syntroleum 12,000 455 37,920 11.2 Rentech 16,450 468 28,450 13.9

29,000 12.9

30,000 12.5

No Lube Lube No Lube Lube No Lube Lube No Lube Lube No Lube Lube 50,900 40,000 54,900 1,039 1,095 1,258 1,302 1,268 1,324 24,000 25,000 26,000 27,000 20,410 21,510 31,450 32,550 23,100 24,120 14.3 18.2 13.2 16.9 16.7 21.3 10.7 15 15.4 19.4

After Oil & Gas Journal (March 2001) E-MetaVenture, Inc. 30

Typical GTL Product Cost and CAPEX Breakdowns

CAPEX OPEX Feedstock Shipping 0 2 4 6 8 10 12 14

CAPEX Breakdown (Typical) Oxygen plant and gas purification Synthesis gas production Fischer-Tropsch reaction Product upgrade 35% 25% 30% 10%

US$/B

After Gafney, Cline & Assoc. (2001/2003) Note: feedstock price range due to local (stranded or near market) variation

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GTL v. LNG Economics1BCFD

GTL-FT Product Capacity CAPEX (Full Chain) ~110,000 BPD $2.2 B (mostly in producing location) $24-27/B $4.40-4.90/MMBtu 60% 77% LNG ~7 MMTPA $2.4 B ($1.2 Plant) ($0.8 Ships) (0.4 Regasification) $16-19/B $2.75-3.10/MMBtu 85% 85%

Product Value Energy Efficiency Carbon Efficiency

After BP study (Euroforum, Feb. 2003) E-MetaVenture, Inc. 32

Some Commercial Issues

Market size: GTL feeds directly into transportation fuels with a very large market LNG has certain demand constraints due to relatively small market In December 2000, US classified GTL product as alternative fuels under the EPACT 1992 tax implications EU is considering Manufacture of clean fuels (low sulfur) in refineries is another key competition for GTL Many US, EU, and other refineries are in the process of installing, enlarging, or otherwise improving hydrotreating and hydrocracking capabilities Significant new technological improvements are making refinery clean fuel conversion quite cost effective

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A Word on Synergies
Much analysis and R&D/developmental effort in improving GTL economics by taking advantage of synergies Petroleum coke, coal, oremulsion (bitumen in water, similar to #6) gasification Hydrogen recovery Power generation (combined cycle) Integration with methanol and olefin production All suggest that, under some circumstances (geography, feedstock availability and pricing, markets, etc.) returns improve Nearly all cases require higher capital Coke, coal, bitumen, refinery bottoms require the more flexible ironbased F-T catalyst (Sasol, Rentech)

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About the Speaker

Iraj Isaac Rahmim is a specialist in petroleum technology and economics. He holds B.Sc. and M.Sc. degrees from the University of California and a Ph.D. from Columbia University, all in chemical engineering.

Currently the president of E-MetaVenture, Inc., he was previously employed with Mobil and Coastal corporations. His early career in Mobil Corporation involved responsibilities for the development and commercialization of a variety of process technologies ranging from clean fuels and light gas upgrading to FCC and resid processing. Later with Coastal Corporation, he was responsible for identifying, assessing, and championing novel business and technology opportunities and solutions for integration into the companys petroleum and petrochemical assets. Recent key activities include bitumen recovery and processing technologies, gas-to-liquids technology and markets, Tier II refinery modifications, and training and litigation support. A recent study on medium to long-term gasoline storage contributed to the California Attorney Generals report on gasoline pricing.

Dr. Rahmim is the president of the Houston, Texas, Chapter of International Association for Energy Economics, a longstanding member of the American Institute of Chemical Engineers, an associate member of the State Bar of Texas (Oil, Gas, and Energy Resources Law Section). He holds a number of patents in refining technologies, has authored papers in a variety of technical areas, and has presented in and chaired sessions at national and international conferences.

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Contact Information
Iraj Isaac Rahmim, PhD E-MetaVenture, Inc. Energy Consulting Practice 6214 Memorial Drive Houston, Texas 77007 USA Telephone: USA (713) 446-8867 Fax: USA (509) 272-1724 Email: [email protected]

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