SPE 88642

GTL: Is It An Attractive Route For Gas Monetization?

Osama Abdul Rahman, Qatar Petroleum (1)
Mohamed Al – Maslamani, Qatar Petroleum (1)
(1) The views expressed in this paper are those of the Authors and do not necessarily represent views of the Organization.

Copyright 2004, Society of Petroleum Engineers Inc.

Introduction
This paper was prepared for presentation at the 11th Abu Dhabi international Petroleum
Exhibition and Conference held in Abu Dhabi, U.A.E., 10–13 October 2004.
Gas-to-liquid process involves the conversion of natural gas
into a clean source of energy mainly diesel and naphtha.
This paper was selected for presentation by an SPE Program Committee following review of
information contained in a proposal submitted by the author(s). Contents of the paper, as Today, many giant oil and gas companies have or
presented, have not been reviewed by the Society of Petroleum Engineers and are subject to
correction by the author(s). The material, as presented, does not necessarily reflect any
planning for demonstration and commercial GTL plants. For
position of the Society of Petroleum Engineers, its officers, or members. Papers presented at examples, Sasol of South Africa installed and operated the
SPE meetings are subject to publication review by Editorial Committees of the Society of
Petroleum Engineers. Electronic reproduction, distribution, or storage of any part of this paper first commercial GTL plant based on coal feedstock about half
for commercial purposes without the written consent of the Society of Petroleum Engineers is century ago and is constructing jointly with Qatar Petroleum a
prohibited. Permission to reproduce in print is restricted to a proposal of not more than 300
words; illustrations may not be copied. The proposal must contain conspicuous 34,000 BPD capacity GTL plant in Ras Laffan - Qatar.
acknowledgment of where and by whom the paper was presented. Write Librarian, SPE, P.O.
Box 833836, Richardson, TX 75083-3836, U.S.A., fax 01-972-952-9435. Expansion of the plant to 100,000 BPD is being evaluated by
Qatar Petroleum and Sasol-Chevron. Shell already has a
15,000 BPD commercial plant in Malaysia and has recently
Abstract
The conversion of natural gas into synthetic fuel is an active signed an agreement with Qatar Petroleum for a giant GTL
area of development. Today, many large and independent oil integrated complex of 140,000 BPD capacity.
companies as well as engineering contractors are involved in Exxon-Mobil is running a 200 BPD demonstration unit
either research, pilot plants, or demonstration units with the in Baton Rouge, Louisiana and is considering jointly with
objective of reducing capital and operating cost of this Qatar Petroleum a commercial scale GTL project possibly
technology. with a capacity of 100,000 BPD. BP has recently started a 300
Beside the technology, the economic factor of the GTL BPD demonstration unit in Nikiski, Alaska. ConocoPhilips
process remains the major element in the application of this has constructed a 400 BPD demonstration unit in Ponca City,
process. The major factors affecting the economics of the Oklahoma which was commissioned in mid 2003 and is
GTL process is the gas price and the capital cost. The GTL considering a commercial scale GTL plant with Qatar
process could be an attractive way to monetize stranded gas Petroleum.
reserves where the application of pipeline or LNG Technology Marathon Oil jointly with Syntroleum is constructing a
is not techno - economically feasible, because the gas is either 100 BPD demonstration unit in Catoosa, Tulsa, Oklahoma.
very far from the market and/or the gas reserve can not Marathon is also considering a world scale GTL project with
support a world scale LNG plant. Qatar Petroleum.
Fuel produced from the GTL process is practically The question is why this flurry of gas-to-liquid
sulfur and aromatics free, accordingly, exhaust emission from projects? The answer is very simple: the market for GTL
the GTL products is not an area of concern. As an example, diesel is huge, as the sulfur and aromatics specification for
exhaust emission pollutants from GTL diesel oil is much Diesel oil becomes and will continue to be tighter to comply
below those required by most stringent present and planned with exhaust mission requirements. Production of refinery
(future) specifications. However, carbon release cycle (from diesel with ultra low sulfur content will be expensive to the
GTL production to consumption) is an active area of research point that makes production cost of GTL diesel oil which is
and studies. practically contains zero sulfur and not more than 1%
The availability of natural gas at reasonable price, aromatics close to that of ultra law sulfur diesel recovered
present crude oil price and the environmental benefits of using from crude oil.
fuel products derived from natural gas has led to the At period of low crude oil prices, production of
realization of many commercial scale GTL units at different synthetic fuel by GTL route was found to be uneconomic as
parts of the world particularly in Qatar which is targeting to be compared to the price of fuel derived from crude oil and the
the centre of the GTL projects. These worldwide projects are application of the process was frozen.
at different stages of implementation. The interest in the process was regenerated mainly by
In this paper, an attempt was made to present the above increase in price of crude oil and by the realization that crude
consideration in more details for the GTL process as a route oil supplies are finite. As mentioned earlier, the other driving
for gas monetization including a broad brush economic force for the present interest in the GTL process is the
comparison with LNG production as an alternative competing increasingly stringent legislation which entails more efficient
route. (deep) desulphurization of diesel derived from crude oil and
2 SPE 88642

accordingly the increase in cost of the production of this ultra 3. The Hydrocracking (Upgrading) Step: In the
low sulfur diesel. upgrading step the waxy paraffinic product is cracked in the
presence of Hydrogen to any required molecular weight
Process Technology products.
The GTL process consists of three main steps: The olefin molecules (CnH2n) become saturated with Hydrogen
• Production of Synthesis gas creation a range of paraffins. Thus, Naphtha is hydro treated
• Conversion of the Synthesis gas to waxy hydrocarbon and olefins are saturated to the corresponding parrafins.
material The waxy product from the F-T step can also be used
• Hydrocracking the waxy material to the desired products for the production of base/special lube oils. Typical product
distribution from the GTL process is as follows:
1. Synthesis Gas Production Step: Methane is steam
reformed to produce syngas, required for synfuel and other LPG 7%
petrochemical products production according to the equation. Naphtha 26%
Kero/Diesel 67%
CH4 + H2O = CO + 3 H2
GTL Or LNG: Which Route To Choose?
It can be concluded from the above equation that Steam A gas producer is always trying to maximize his profit from
Reforming produces a high Hydrogen: Carbon Monoxide ratio this valuable hydrocarbon resource. His target is to have a
of about 3 which is not optimum for GTL production requiring sustainable market for his gas at minimum operating cost and
a ratio of 2. However, the ratio from the steam reforming can highest revenue. If a gas market is available to him within
be adjusted by removing the excess hydrogen by Membrane relatively a short distance, say less than 2000 KM, and if the
separation or Pressure Swing adsorption. The optimum H2:CO gas buyer can commit a long term gas purchase agreement for
ratio for the GTL process can be achieved by Partial the total quantity of gas, the most economical option available
Oxidation of Natural Gas (Methane) in which natural gas is to the gas producer appears to be the installation of a pipeline
burned at high temperature according to the equation: to sell the gas to this market (a take or pay clause is
2CH4 + O2 = 2 CO +4 H2 sometimes incorporated in such agreements). In actual
practice, this is not the case for most of the gas producers.
Partial Oxidation of Methane requires an oxygen plant, Gas production in most of the cases exceeds the gas
using cryogenic air separation, for the production of Oxygen demand of the nearby market and sometimes, the gas
from air. production is located in locations very far from the market,
A process technology had been developed in which air which makes the pipeline option either less economically
is used in place of pure oxygen thus eliminating the cost of attractive or even not technically feasible.
oxygen plant. Excluding the pipeline option, it becomes essential to
The third process to produce syngas with the required find another mean to monetize the gas discoveries at these
Hydrogen: Carbon Monoxide ratio of 2 is the Auto Thermal locations. Considering the fact that liquid is easily transported
Reforming process. This process can be considered as a economically for very long distances, the option of liquefying
mixture of the other two processes namely Steam Reforming the gas or converts it into liquid is emerged.
and Partial Oxidation. CO2 can be added to the blend through The process of gas liquefaction and production of LNG,
a recycle stream. is based on chilling the gas to a very low temperature, around
– 165oC after the removal of impurities in the gas: Sulphur,
2. Synthetic Fuel Production Step (F-T Process): In this Carbon Dioxide and in some cases Nitrogen; which is
step the Carbon Monoxide and Hydrogen produced in the first normally removed from the LNG product rather than the gas
step is either passed through a Fixed Bed Catalyst of Cobalt / feed. The LNG is then stored in a specially designed tanks,
Iron or the mixture is bubbled through a Hydrocarbon slurry shipped in a special LNG carrier, received in a suitable LNG
containing a catalyst. The product of the reaction is a waxy receiving terminal where it gets re-gasified (converted into
product send to the upgrading step. Hydrogen is reacted with gas) and then supplied to consumers which are mainly power
Carbon Monoxide to give a long chain waxy product stations. The gas is also used after compression (CNG) as a
according to the equation: clean fuel for vehicles. The NGL route requires:

nCO + (2n +1) H2 = CnH2n + 2 + nH2O • Large proven gas reserves. A world scale LNG plant
OR requires a proven gas reserve of at least 4 Trillion SCF of
nCO + 2n H2 = n(- CH2 - ) + n H2O gas
• Long term gas supply commitment, normally for not less
In the above equation, the term - CH2 – represents than 20 years
basic building block of the paraffin molecule. Straight chain • Long term gas purchase agreement for the same period
paraffins are main products of the F-T process with minor which in most of the cases includes a Take or Pay clause
quantities of iso-paraffins and olefins also present in the to protect the large investment of LNG production made
products. Because of the paraffinic nature of the product, F-T by the gas seller
diesel has high cetane number.
SPE 88642 3

• Special LNG carriers to be dedicated for the LNG plant It can be concluded that the investment cost for both routes
production and its market is nearly the same.
• LNG receiving and vaporizing terminal
2. Operating Cost: Operating cost (Excluding Depreciation
The problem of LNG marketing is that it traditionally and Feedstock Cost) of the liquefaction plant is estimated @
does not normally has a spot sale market which means that any $1.0 /MSCF, Shipping cost is estimated at $0.5 /MMBTU and
LNG plant should have its own dedicated market for the life of Regasification cost is estimated @ 0.3/MMBTUi.e a total of $
the plant. At present, minor quantities of LNG is being 1.8 / MMBTU. Therefore the yearly operating cost for LNG
marketed on spot basis. route will be $375 Million/Year, assuming heating value of
The other option of gas utilization is converting it into 1000 BTU/SCF, against a total operating cost of $ 6 / Bbl or a
petroleum products of superior quality through the Gas To total operating cost of about $145Million / Year for the GTL
Liquid (GTL) process. The GTL process is based on Fischer case (both excluding Depreciation and Feedstock cost)
– Tropsch (F-T) reaction for the conversion of Synthesis gas Operating cost of GTL route is about $230
(CO + H2) into liquid petroleum fraction. The products from million/Year lower than the LNG route.
GTL plants are the same as those produced from a refinery.
They can mix easily with the available infra structure of the 3. Revenue: The GTL average products price namely
petroleum products Naphtha and Diesel oil is estimated based on:
• Crude price of $19/Bbl
Production Cost For The GTL Route • Naphtha and diesel oil average prices are higher than
The quantity of natural gas required to produce One barrel of crude price by about $0.5 /Bbl and $ 2/Bbl respectively.
products is about 10,000 SCF. The investment required is in • Quality Premium for GTL Naphtha is taken at $ 0.5 / Bbl
the range of $ 25,000 – 30,000 /BPD of products. GTL plant and that for GTL Diesel is taken @ $ 1 / Bbl
operating cost, excluding depreciation and feedstock cost is in
the range of $ 4 – 6 /Bbl. Based on the above assumptions, the average GTL
Based on the above, the production cost of a barrel of products price is:
GTL products is estimated as follows:
Feedstock Cost: $ 20 /Bbl for Petrochemical Naphtha
and
$ 5 (at gas price of $.5/MMBT) – $10 (At $1/MMBTU gas $ 23 /Bbl for Diesel oil
price)
Capital Cost (@ 15 % ROI) : $11 - $14 The LPG price is taken as $ 180 /Ton
Operating cost: $4- 6
Total Production Cost : $20 - $ 30 Per Barrel Of The revenue from the GTL route is therefore estimated
Products at about $ 515 Million /Year. The revenue generated from the
LNG production is estimated at about $ 730 Million/ Year
GTL Vs. LNG Economics based on LNG products sales price of $3.5 /MMBTU
A world scale LNG plant of capacity 4 Million Tons/Year will The revenue generated from LNG route is higher
requires about 650 MMSCFD of feed gas. The same quantity than that from GTL route by about $ 215/Year
of gas is estimated to produce 65,000 Bbl/day of GTL However, the increase in revenue for the LNG route is
products, mainly Naphtha and Diesel Oil. The quantity of off - set by nearly a similar increase in its operating cost.
Diesel Oil is taken as 44,000 Bbl/day, Naphtha quantity is
taken at 17,000 Bbl/day, and the remaining quantity (4,000 Conclusion
BPD) is assumed to be LPG. It can be concluded that GTL would be possibly the preferred
route if the pipeline option is not technically / economically
1. Investment Cost: Investment cost required for the GTL feasible and / or the gas reserve can not support a world scale
route is estimated @ $28,000/BPD of GTL products. For a LNG plant gas.
65,000 BPD plant, the investment required is therefore Otherwise, from the previous figures, we can conclude
estimated at $ 1.82 Billion. that the profitability of both LNG production and GTL is very
The liquefaction plant investment cost is estimated @ close to each other and there is no clear economic preference
$200/ton per year of the LNG product. can be made. Both routes competes well with each other.

• For a 4 Million tons per year plant, Investment cost for However, if LNG production already exists in a
the plant is estimated @ about $ 800 Million. country, the GTL route could be more attractive for that
• Cost for LNG Ships, assuming 6 ships each 135,000 Cu country as it gives the opportunity to diversify the utilization
m capacity is estimated @ $140 million /ship i.e a total of its gas reserve.
of $ 840 million for the ships.
• The re –gasification and other related cost is taken @
30% of plant investment OR $240 Million.
• Therefore, the total investment for the LNG route is
estimated @ $ 1.88 Billion.
4 SPE 88642

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1. Brian A. Total: Gas-To-Liquids, Oil and Gas investor

(July2002)
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Advances, Economics, prospects, paper presented at the 26th
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Oil & Gas Journal (Sept21, 1998)
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Gas Journa l (March 8, 2004)
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Liquid Explorer, Sep 2003
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Gas – To – Liquid Products, Hydrocarbon Processing,
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