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BP believes GTL on cusp — cost, technology challenges remain
Kristen Nelson PNA Editor-in-Chief
BP believes a gas economy is a stepping stone on the road to renewable energy, that “we are on a path through gas to hydrogen and on to renewables,” Graham McNeillie, vice president, global gas technologies for BP, told the opening session of the 6th Natural Gas Conversion Symposium in Girdwood June 18.
McNeillie said BP believes that by about 2015 there could be 1.5-2 million barrels per day of GTL production — clean diesel, clean jet fuel, clean lubes. What will it take to get there? There are going to have to be cost reductions. The economics of GTL are “very, very straight forward. There are not many variables” McNeillie said. Gas goes into the plant. You have to build the plant, you have to recover the cost and you sell the product, so the costs are feedstock price plus plant capital cost.
BP runs its economics with 50 cent gas, he said. “We do that because that’s kind of where things start to happen. But actually, there isn’t an awful lot of 50 cent gas in the world.” It’s like oil projects, he said. Even at $30 oil, you don’t do billion dollar investments based on $30 oil — you do them at mid-range cycle, $14-$18 oil.
Right now, he said, based on 15 percent return and 50 cent gas, you have to sell GTL product at about $28 a barrel.
The other assumption is $20,000 per daily barrel capital cost.
At capital costs in excess of $30,000, “there was actually no hope,” he said.
“Once we get down to the 20s you start to see real hope.” BP believes the industry is currently between $20 and $25 capital cost per daily barrel capacity.
“So for gas to liquids to really, really take off, for us to really start to displace black oil production, which is where certainly my team is trying to get us to, those costs will have to come down we think to about $15 to $17. So this is still a substantial reduction in cost.”
McNeillie said he thought that cost reduction could probably be reached in small incremental technology steps. “But would we benefit from some breakthroughs? Absolutely,” he said.
Cost reduction is essential, he said: “We have to take ourselves over the cusp if we’re actually going to make the last 20-25 years of research and development really work well.”
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