Recent catalyst technology breakthroughs could provide alternative to flaring or installing re-injection
GTL processing plants, like many systems, can be scaled to fit the decks of barges, platforms, and FPSOs (courtesy Syntroleum).
Rick Von FlaternAbout 2,500 tcf of proved natural gas, roughly half of all proven reserves, is being left in the ground. In fact, despite strong worldwide growth in demand for natural gas - more than doubling in the years between 1970 and 1993 - gas reserves continue to grow, discovered and left in place for lack of transportation infrastructure or because the gas is of less than pipeline quality.
Technology Editor
Natural gas markets have been expanded through improved pipeline technology, making long distance transportation more feasible. And, in areas of large, high quality gas reserves and little infrastructure, as is the case offshore Indonesia, conversion of gas to shipable liquids (liquid natural gas, or LNG) has proven sufficiently economic to provide reasonable returns on that capital-intensive technology.
But for the majority of the world's gas fields, production rates and field size are insufficient to support the cost of LNG processing plants and the requisite cryogenic tanks and tankers in which to transport the product. Long-distance pipelines are often saddled with too much geographic, economic, and political risk to entice investors.
Much produced gas also never makes it to market because it is flared off as an unwanted byproduct of crude oil production - a practice that has been increasingly attacked in many parts of the world as detrimental to the environment.
Recent breakthrough
But all that may be changing. Recent breakthroughs in catalyst technology appears ready to provide an option to flaring or ignoring gas finds by turning them into a synthetic fuel free of aromatics, sulfur, and heavy metals may turn inconvenient gas into profits. The Fischer-Tropsch reaction, used by a crude-starved Germany during World War II and an oil-embargoed, apartheid South Africa in more recent times, uses a mechanically simple process to convert natural gas to synthetic hydrocarbons. The F-T reaction was first introduced to the world by two German scientists in 1923 but has been largely ignored since as uneconomical when crude oil was available for anything less than about $35/bbl.While several of these plants are in commercial operation - Shell operates one in Malaysia and South Africa continues its operations - they are technological successes but economic failures. Now, two American companies say they have leaped the economic hurdles through new catalysts for simplified gas-to-liquids (GTL) technology. Reaction among energy business observers has ranged from a healthy skepticism to pronouncements that a new era for the traditional oil-gas value relationship has arrived. The two, Syntroleum of Tulsa, Oklahoma, and Irving, Texas-based Exxon, have been joined by a third company which has received US government funding to develop yet another process its developers believe to hold even more economic promise.
Gas field economics
Similar gas production strategies, such as LNG and extended pipelines, are profitable only in large, long-life fields. Likewise earlier F-T plants were economically justified only when they reached 50,000 b/d of output from 500 MMcfd source gas, a level possible in only about 4% of the world's recoverable gas reserves outside the US. The impact these new processes will have on global economies is in their ability to be economically applied in fields of relatively small production rates and relatively short lives in a $20/bbl (or less) oil price environment.The latest processes are purportedly profitable at output levels as low as 2,500 b/d from plants compact enough to be modularized and placed on platforms, barges, or FPSOs. Shipability means plants can be easily removed from depleted offshore gas fields to other offshore fields of similar size. The result of this low-cost, compact design, claims Syntroleum, is a system with the potential to bring 40% of the world's gas fields, holding about 95% of the world's gas reserves, to market where they would be otherwise left fallow or burned as waste.
To make their product perhaps even more promising, claim Exxon and Syntroleum spokespersons, their improvements to F-T technology have resulted in simpler hardware and process steps dropping initial capital expenditure to between $12,000 and $27,000 per bbl of output/day. That is well below the accepted $30,000/bbl/day break-even point traditionally used for such installations.
Similar systems
The new GTL technology builds on improvements to the work of Franz Fischer and Hans Tropsch, who discovered a method to catalytically convert carbon monoxide and hydrogen (synthesis gas) into synthetic hydrocarbons. The validity of their technology has never been in doubt but since the economics of the system relied on $35/bbl oil (1997 $US), where it was used it depended on government subsidies.The two companies leading the modern work, Syntroleum and Exxon, are understandably guarded about their proprietary technology and specifics are hard to ascertain. Conventional F-T processes created syngas with partial oxidation with oxygen through steam reforming or air separation plants, or a combination of both. Steam reformer plants, operate in high pressure, corrosive environments and so must use expensive alloy tubing. It is also an extremely endothermic reaction requiring generation of vast amounts of heat, and it generates a too-high syngas ratio (H2 to CO) and CO2 must be recycled through an amine system. Unwanted nitrogen is created in both these process and must be disposed of.
The heart of the Syntroleum process is autothermal reforming (ATR) with air. The system is easy to start up and shut down, and uses a relatively inexpensive vessel with a nickel-based catalyst. The simplified, two-step system converts natural gas to a nitrogen-diluted syngas in the proper syngas ratio. The single F-T step requires no recycling thus avoiding nitrogen build-up. The nitrogen also removes the need for a recycle loop to reintroduce mass flow to remove the exothermic heat of reaction.
Side-products of the Syntroleum process can be used to defray capital or operating costs. Sufficient amounts of heat generated by the exothermic reaction can be harnessed to generate power for the plant itself with extra exported for profit. It also generates a considerable water easily treatable to potable condition. For example, a 10,000 b/d plant generates about 50 MW of electricity and 15,000 b/d of water. Too, the highly charged nitrogen formed by the process can be reinjected or help drive the plant.
Exxon calls their process Advanced Gas Conversion Technology 21st Century (AGC-21). It evolved from goal-gasification work done by the company in the mid-1980s and is a three-sequence process using catalytic partial oxidation and steam reforming in a single reactor vessel, an F-T catalyst, and final product upgrade. AGC-21, as described by the company, appears very similar to the Syntroleum process but where it uses air in the syngas step, Exxon uses oxygen. And, of course, they use different catalysts. The Exxon process produces a paraffiny wax before being converted to various chain-length hydrocarbons.
The latest entry into the GTL market is California-based Catalytica, which was awarded $2.0 million by the US Department of Commerce agency, National Institute of Standards and Technology to pursue a three-year program to develop a process for direct oxidation of natural gas to methanol and transportation fuels. According to the agency's press release announcing the NIST award, the aim DMO (direct methane oxidation) is to "convert natural gas to gasoline by way of the direct-oxidation process at costs competitive with products derived from crude oil."
Catalytica said the DMO process is fundamentally different from the others in that the direct oxidation and low temperature conversion of the methane provides higher thermal efficiencies by avoiding the syngas step. And since there is no high-temperature reforming reaction, said Catalytica's Peter Kilner, "a lot of capital involved in heat management issues is avoided completely."
While no commercial plants are yet in operation, Syntroleum and Exxon at least, use a rule-of thumb conversion of natural gas using 10 Mcf of natural gas input per bbl of product (assuming 1,000 BTU/scf pipeline quality gas).
Status
Syntroleum began work on their process in 1984 and has had a 2 b/d pilot plant in operation since 1990. The small plant demonstrated to the company first the need for catalyst development. What evolved was a highly active, cobalt catalyst that produces a waxy syncrude of primarily uniform, straight-chain hydrocarbon molecules with less than 10% methane yields.Exxon has created a pilot plant in Baton Rouge, La., that is producing 200 b/d of product from 20 MMcfd of natural gas and is looking for candidates for their process. Exxon had been rumored to be in an alliance with Qatar to build an AGC-21 plant in that gas-rich country to convert 500 MMcfd of gas to 50,000 b/d of middle distillates and other oil-based products. But officials at Exxon say that proposal is still under study and no decision has been announced. The company is also reportedly eyeing Alaska, Yemen, Australia, and Papua New Guinea as possible plant sites.
Catalytica's contribution to GTL technology is in the research and development phase. Their government-funded program is for three years which will take the company through a bench scale development, at which point it will go though a pilot phase before going to the market place. "We are looking at five years off before the technology will be (commercially) ready," Kilner said.
Industry participation
Once it is commercial Catalytica's process, according to Kilner, will easily scale up and down while remaining economically competitive, meaning the plant would be small enough to place on shipboard. That thinking also appears to be driving engineering and oil companies' recent spate of agreements signed with Syntroleum.Marathon and Texaco have signed development and master license agreements with Syntroleum. And Brown & Root and Bateman have both signed engineering, procurement, and construction contracts with them.
Marathon's Bill Ryder said his company is looking at the technology without concrete plans but sees a use for GTL in their offshore Sakhalin Islands holdings. "There is nothing in concrete," he said. "That is one area where we might use it. We think that it (GTL) is going to be part of the company's future and we just wanted to have available for our use all the tools that would maximize the value of our assets."
Ryder also expects his company to take advantage of Syntroleum's scalability for use aboard FPSOs and as an alternative to the more capital intensive LNG process. "It is certainly not something that would supplant an existing LNG operation," he said. "But we might do it in place of LNG."
Marathon's position is a familiar one. Oilfield company signatures affixed to licensing, secrecy, and development agreements are a vote of confidence in the future ability of the new technology to monetize gas reserves. But, said Ryder, "we are talking about possibilities at this point, not probabilities."
Texaco spokesman, Paul Weeditz, echoes his colleague at Marathon. "As an energy company we recognize there are certain projects and economic developments going on that could impact our business," he said. "And we joined with Syntroleum in order to be out in front of this issue as it evolves."
But actual plant construction by Texaco is probably some time off, according to Jeff Harrison, the company's GTL portfolio manager, and Maggie Schlank, Texaco manager of advanced technology. The two are charged with confirming Syntroleum's economics.
"It (GTL technology) probably still has a few years of development left," said Harrison. "A number of companies are working on technology advances that will lower the capital costs. Those are in various stages of development."
Time is right
The latest GTL technological breakthroughs are perfectly timed to spur oil companies to invest in it. "It is the fact there are very large remote gas reserves all over the world," Schlank said. "As we look at maximizing energy usage this becomes another avenue for us if we have technology to access that remote gas."Schlank also points to the increasingly stringent environmental policies facing oil companies around the world as a motivation for GTL. For example Nigeria, she said, imposes monetary penalties for flaring gas, "so companies that want to be successful in these markets have to look for creative ways to avoid those kinds of penalties."
Brown & Root signed agreements with Syntroleum after investigating their process and deciding, according to Senior Vice President, Jay Weidler, "(Syntroleum) had something." The companies signed a memo of understanding after the first of 1997 and, using the greater access to details which that provided them, have intensified their investigation of the process. "We have concluded it looks doable and we are now in the process of honing in on a size we feel would be useful for remote oilfields and particularly remote offshore oilfields that could be barge mounted or made into modules to be set on platforms or placed on a deck of a ship."
By doable, Weidler means to his company the process makes sense both technical and economic sense. Brown & Root conducted what the executive called a rough check of the economics in July and concurred with Syntroleum's economics. They also came to feel nothing in the technology prevents it from being shipped offshore like so many other oil and gas processing systems before it.
Brown & Root will begin actual engineering on a barge concept in early May in their Alhambra, Calif., yards. They are currently doing process evaluation, major equipment sizing for weight and dimension, and estimates on piping and other equipment. Following that, the project will be moved to Houston where it will be fitted to a sized barge and have its stability and behavior in different sea environments checked before the company markets the concept.
"We really fell in love with the technology but being a company of our size we have to do our due diligence before we go forward and promote something," Weidler said. "So we are doing our due diligence and have not found anything that we don't think we can work around or that will be detrimental to what we think it can do."
Conclusions
Gas to liquid technology seems poised to become a force in the oil and gas industry. But whether it is a revolution or just another tool with which to exploit hydrocarbons is still open to question. "That is something we wrestle with as we talk about this with our business partners," said Texaco's Schlank. "With the high capital-intensive costs of these kind of facilities that are out there now we can't picture there would be 10-20 of these facilities worldwide."Harrison agrees and cautions against hyperbole. "You have to look at the capital costs, even using Syntroleum's numbers or Exxon's numbers, and think of what kind of volumes you would have to generate on a daily basis to start impacting world oil demand or pricing," he said. "You also understand that there is a lot of up front capital that would be required before you begin to impinge on the economics of the current crude pricing and supply and demand."
Even with those caveats, others argue, the economic consequences of such a technology - applicable as it is to such massive untapped reserves - is bound to be substantial. In his January 1997 newsletter, Energy Advisory, William S. Pintz quoted unnamed petroleum industry executives who called the new GTL technology "the killer application for gas," "truly revolutionary," and "the dawning of a new era."
Judging by service and operator early interest, the real impact of GTL technology should be evident in the early going of the next century.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
