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Vol. 16, No. 35 Week of August 28, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Gasoline from the Slope?

Janus Methanol proposes moving natural gas to market by conversion to gasoline

Alan Bailey

Petroleum News

Following a May presentation to Alaska legislators on the potential for using North Slope natural gas to produce gasoline, as an alternative to exporting the gas from the Slope by pipeline, Janus Methanol chairman Deo van Wijk has been back in Alaska talking to North Slope oil producers about his concept. Van Wijk, whose company has been involved in methanol production for a number of years, thinks that a worldwide abundance of natural gas can revolutionize gasoline production, using a proven two-step process in which natural gas is first converted into methanol and then gasoline is produced from the methanol through a process called methanol to gasoline, or MTG.

Raw North Slope natural gas could be used, without a need to remove carbon dioxide, although sulfur in the gas would have to be extracted, he said.

Game changer

The processes involved in synthetic gasoline production are already in commercial operation in several parts of the world, and the economics of producing gasoline by this means are overwhelmingly favorable, Van Wijk says.

“This can change the economy of the United States,” Van Wijk told Petroleum News Aug. 12. “Nobody argues with the technology. Nobody argues with the availability of natural gas. And it is the cleanest gasoline that we can produce in the United States.”

The company’s original concept for MTG in Alaska involved the production of methanol from natural gas on the North Slope; shipping of the methanol to Valdez through the trans-Alaska oil pipeline, along with North Slope crude oil; and extracting methanol from the oil at the southern end of the pipeline for processing into gasoline for export by sea from Valdez.

However, because of the potential for methanol to cause pipeline corrosion, the company now thinks that a better option would be to generate both the methanol and the gasoline on the Slope. The gasoline would be mixed into North Slope oil for shipment to the U.S. West Coast along with the oil, in effect adding high-value gasoline into the mix of products delivered to refineries.

Improved efficiencies

Van Wijk told Petroleum News that the keys to viable operation of this process are simplified methanol production techniques that have eliminated some processing modules used in earlier plant designs, coupled with the scaling up of the plant size to achieve major economies of scale. Methanol and MTG plants are built in the form of “trains,” in which a single train consists of a complete set of processing facilities. The total processing capacity of a plant then depends on the number of trains that the plant includes. Van Wijk thinks that the optimum approach to developing MTG on the North Slope would be to start with a two-train plant and then progressively add two more trains every couple of years. The ultimate processing of the 4.5 billion cubic feet per day of gas currently envisaged for export down a future North Slope gas line would require 14 trains, producing 450,000 barrels per day of gasoline, Van Wijk said.

The initial two-train plant could produce 63,000 barrels per day of gasoline, he said.

Feasible gasoline prices

Using ballpark estimates of development costs on the North Slope, assuming for example a more than doubling of costs compared with a region such as the U.S. Gulf Coast, Van Wijk has estimated a $7.7 billion price tag for an initial two-train plant. Assuming a 20 percent return on investment over a 15-year period and a tax rate of 35 percent, gasoline could viably be sold at a price of $1.583 per gallon at a natural gas price of $2 per thousand cubic feet, Van Wijk said. The viable gasoline price rises with increasing natural gas prices, with the gasoline price reaching $3.458 at a natural gas price of $10 per thousand cubic feet, he said.

For a number of years there has been discussion of the potential to convert North Slope gas to diesel fuel on the North Slope using a process called gas to liquids, or GTL, and then shipping the diesel fuel down the trans-Alaska oil pipeline. The core of the GTL process is the Fischer-Tropsch synthesis, a chemical process first used in Germany in 1936 to produce synthetic liquid fuel. However, a study of the relative costs of the Fischer-Tropsch process and MTG has indicated that it is significantly cheaper to produce a given volume of fuels with MTG than with Fischer-Tropsch, while the gasoline produced from MTG has a higher value and quality than the diesel from GTL, Van Wijk said.

And, unlike MTG, GTL produces a certain amount of pipeline clogging wax along with the liquid fuel — essentially, the MTG process outputs mainly gasoline, with some liquefied petroleum gas and methane, and with a low benzene content and no sulfur, he said.

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