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Vol. 10, No. 18 Week of May 01, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Nigeria gets GTL plant

Qatar delays Conoco, Marathon GTL plans as LNG takes share of gas

Allen Baker

Petroleum News Contributing Writer

Two projects to turn Nigerian natural gas into liquid fuels have been approved by the government in the African country, and Halliburton has received a $1.7 billion contract to build the biggest project for a ChevronTexaco subsidiary.

But meanwhile, in gas-rich Qatar, much bigger GTL projects proposed by ConocoPhillips and Marathon have been put on the back burner by that government, at least temporarily, apparently in favor of LNG.

“The GTL with Marathon and Conoco Phillips, we said we will hold it,” Abdullah bin Hamad Al Attiyah told reporters at a gas conference in Port-of-Spain, Trinidad, April 26. “We will hold it until we devise more studies.” He is Qatar’s energy minister.

A joint venture by Sasol and ChevronTexaco will also be on hold for up to three years.

Using wasted resource

The Nigerian project at Escravos, 60 miles southeast of Lagos, will use technology by Sasol of South Africa, one of the pioneers in gas-to-liquids technology and the world’s largest current producer. A new plant under construction in Qatar also uses Sasol engineering.

Nigeria flares around 600 billion cubic feet of gas each year, a figure that’s equivalent to about 3 percent of total U.S. consumption. So the country has a big incentive to make use of that resource. LNG projects are also on the drawing board for Nigeria, where gas is brought to the surface in association with oil production.

The Escravos project will be a 75/25 joint venture between Chevron Nigeria Ltd. and Nigerian National Petroleum Corp. It will produce 34,000 barrels a day of low-sulfur diesel, naphtha and liquefied petroleum gas. The huge engineering, procurement and construction contract was awarded to Halliburton subsidiary KBR on April 8.

Another Nigerian project is likely to be much smaller, but potentially unique. Syntroleum Corp. of the United States and several partners are planning an offshore GTL project for the Aje field, 15 miles off Nigeria, and the group is planning to drill a well later this year in 3,100 feet of water. The Aje 3 well follows an exploration well in 1996 and an appraisal well in 1997.

Syntroleum has been working for years to get its technology accepted by industry, and Marathon Corp. has partnered with the small firm, which has produced fuel under a government grant from a 70-barrel-per-day pilot plant in Oklahoma. That fuel was used to power buses in Denali National Park and Washington, D.C., as part of a test of GTL diesel fuel.

Syntroleum said March 30 that the plant had produced 140,000 gallons, or about 3,300 barrels, of ultra-clean fuel for the government contract. “Preliminary results indicate substantially lower emissions and enhanced vehicle performance from Syntroleum’s S2 fuel,” the company said.

LNG trumps GTL in Qatar

In Qatar, which has won tens of billions of dollars worth of investments by multinational firms in LNG and GTL projects, the growing demand for LNG has pushed aside some GTL development, at least for the moment.

Just a few years ago, Qatar planned to produce 40 million tons a year of liquefied natural gas by 2020, said Al Attiyah, the energy minister. But LNG production by the Middle Eastern country will now reach 77 million tons a year by 2010, he said.

“We have to book the reserves for the future,” the minister said. Qatar wants to avoid problems with infrastructure, logjams in shipping, and contractors, he explained.

Marathon spokesman Paul Weeditz said his company remains interested in the Qatar project, even with the slower time frame. Qatar’s approach to developing the North Field is “reasonable and responsible,” Weeditz said.

ConocoPhillips CEO Jim Mulva was asked about the development during a conference call with analysts following the company’s earnings announcement April 27.

“We’re not thinking twice about Qatar,” responded Mulva, whose company also has a deal with Qatar for LNG equivalent to about a billion cubic feet of gas daily, with shipments starting in 2009. Qatar’s concern is about timing for the project, not its feasibility, Mulva noted.

Qatar’s huge North gas field, which has no associated oil production, holds reserves of more than 900 trillion cubic feet, giving the tiny Middle Eastern country the third largest reserve base in the world after Russia and Iran. Much of the Iranian reserve is in the South Pars field, adjacent to the Qatari deposit.

Competing options

Oil companies have worked for years to come up with ways to bring remote natural gas reserves to market. LNG and GTL are radically different methods of turning that gas into a liquid that can be transported across the oceans of the world to energy-hungry consumers.

LNG involves a huge refrigeration system that chills the gas to 260 degrees below zero, causing it to condense into a liquid that fits in one-sixhundredth of the space the gas requires. But special insulated tankers are needed to transport that liquid, which then must be regasified by heating it back up once it gets to its destination.

GTL uses a chemical process to break down the methane into carbon monoxide and hydrogen gas. Those products are then essentially assembled into longer-chain hydrocarbons to form synthetic diesel, naphtha, lubricants and wax. The diesel fuel has no sulfur, which gives it a ready market, particularly in Europe, for mixing with diesel from conventional refineries to lower the sulfur concentration.

But huge amounts of energy are lost in the GTL process, perhaps a third of the total energy in the gas. On the other hand, flaring consumes all of the energy.

Aside from the energy loss, gas-to-liquids processes are incredibly capital-intensive, with an investment of $20,000 to $30,000 needed for each barrel of capacity. But that’s down from earlier development costs in the range of $50,000 per barrel of capacity.

The technology was originally developed in Germany during World War II to turn that nation’s coal reserves into tank fuel. Later, South African engineers refined the system for the same purpose when that nation was under a worldwide embargo due to the racial policies of its white minority government.

Sasol a pioneer

Following on that development, Sasol is currently the world’s biggest GTL producer, with 160,000 barrels per day of liquid fuels extracted from synthetic gas derived from coal at its Secunda facility in South Africa.

Sasol is on the forefront of development in Qatar as well, with its Oryx project now 80 percent complete and first production expected early next year. Two huge Sasol reactor vessels are expected to arrive in Qatar in April after being shipped from Japan, where they were built. The cigar-shaped reactors are 25 stories high and each weighs more than 2,000 tons.

The Oryx facility will convert about a third of a billion cubic feet of lean gas into 34,000 barrels of liquids each day.

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