NYT examines the next big opportunity in the U.S. energy market: turning natural gas into liquid...

NYT examines the next big opportunity in the U.S. energy market: turning natural gas into liquid fuel. South Africa-based Sasol (SSL), whose plant in Qatar makes 32K bbl/day of liquid fuels, plans to spend up to $14B to build the first gas-to-liquids plant in the U.S. But opinions vary widely: Exxon (XOM) doesn't see GTL as a relevant source of fuels for another 20 years.
Comments (7)
  • 123andy
    , contributor
    Comments (42) | Send Message
    From an energy efficiency point of view converting to liquids reduces the energy content of equivalent natural gas in the conversion process. Since the technology is around for running diesel engines, including heavy duty diesels on natural gas directly that is the preferred route. The trade off is to retain use of distribution network or add natural gas to the fueling system network. The investment required in GTL plants is huge, and to maximize value of the liquids produced you probably want to segregate the higher quality GTL fuel. In the end it is a judgement call, but benefits of going to GTL is far from obvious.
    18 Dec 2012, 12:13 PM Reply Like
  • youngman442002
    , contributor
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    I´ll just through in one more cost for consideration....trial lawyers after the first big explosion.....
    18 Dec 2012, 12:24 PM Reply Like
  • bobwyman
    , contributor
    Comments (90) | Send Message
    The cheapest fuel to produce from natural gas is methanol. In essence, methanol is "compressed natural gas" but with the advantage that it is a liquid at standard temperature and pressure. Because methanol is a simpler chemical than drop-in gasoline or oil, it is much, much easier to generate from natural gas and many other feedstocks. Additionally, methanol can be blended with gasoline just like ethanol is -- but it is cheaper and its production results in less environmental impact.


    Currently, the primary bar to use of methanol in transportation is government regulation. However, passage of the Open Fuel Standard Act (HR 1687), would remove those barriers by requiring vehicle manufacturers to produce cars certified to run on methanol blends.


    The real potential for Sasol's Louisiana plant may be that once they have built the facility, they will be able to rapidly convert from drop-in fuel production to much cheaper and thus more profitable methanol production once Congress or the States remove the legal barriers to methanol use in our vehicles.


    It is time that Congress stopped picking winners (oil and ethanol) and losers (methanol) and allow Fuel Choice Freedom which would introduce real competition for oil in the liquid transportation fuel market. Once the Open Fuel Stanrdard Act is passed, there will be a new, vast market created for cheaper, cleaner alternatives to petroleum in "normal" cars.


    For more info see:
    Open Fuel Standard: http://bit.ly/JVdXcj
    Fuel Freedom Foundation: http://bit.ly/O0JHMU
    18 Dec 2012, 12:46 PM Reply Like
  • 123andy
    , contributor
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    Simply put Methanol is highly toxic and introducing it huge quantities into the fuel market is dangerous. It is the reason why it was dropped from consideration gloablly as a fuel cell fuel. So I hope that Bobwyman's suggestion will not prevail.
    18 Dec 2012, 02:13 PM Reply Like
  • bobwyman
    , contributor
    Comments (90) | Send Message
    123andy is incorrect in suggesting that methanol is unusually toxic. This old myth does great harm to our prospects for alternative fuels.
    As explained on page 126 of the "MIT Study on the Future of Natural Gas"[1], "The toxicity of methanol is similar to gasoline." Also, "Ethanol is soluble in water and is biodegradable."


    MIT suggests that "aversion to methanol may have developed from its association with MTBE (Methyl Tertiary Butyl Ether), another additive to gasoline that contaminated ground water from leaks in underground tanks and that, unlike methanol, produced an unpleasant taste in water at very low concentrations." Just because two things sound the same doesn't mean they are the same...


    Additionally, the MIT report refutes the suggestion that toxicity was the reason why methanol use was curtailed. They explain: "Ethanol use was demonstrated in the U.S. in the early 1990's in some 15,000 vehicles. Interest waned in the mid-1990's, however, due to falling oil prices and the ascendancy of ethanol in low-concentration blends, driven by strong political support from the farm states."


    Twenty years ago, when people were experimenting seriously with Methanol, gas was much more expensive than it is today and gas prices were closely aligned to oil prices. That is no longer the case. All the methanol tests showed it to be an excellent and safe fuel. It was only dropping oil prices and lobbying from Agri-business that killed off its use. Today, we still have the lobbying, but the price argument no longer holds and the toxicity argument has never held.


    Today, with high-priced gas at say $4/MMBtu, you should be able to produce methanol for $1.30 per gallon of gasoline equivalent (gge). With gas at $3.50 per gallon, that is a savings of $2.20 per gge. How much demand do you think Sasol would see for liquid fuel at $1.30 gge?


    [1] http://bit.ly/TCDto5
    18 Dec 2012, 04:59 PM Reply Like
  • kmi
    , contributor
    Comments (4661) | Send Message
    Just to keep things honest, when you say 'gas at $3.50' you are including some $0.70 of assorted taxes. I have no specific input on whether your $1.30 gge for methanol is accurate, but even if its off some $0.30-0.50 one can see the distance is still pretty large.
    19 Dec 2012, 09:47 AM Reply Like
  • bobwyman
    , contributor
    Comments (90) | Send Message
    To give an example at the extremes, let's use the current Methanex (MEOH) non-discounted price/gallon for methanol ($1.45/gal) and assume that we need 2 gallons for each gallon of gas equivalent (gge). That gives us $2.90/gge.


    EIA says that about 11% of the price of gas is taxes, so, given a current average retail cost of $3.50 today, I'll set the pre-tax cost of gas at $3.10.


    The result is an unrealistically conservative methanol price advantage of $0.20/gge. But, that's the worst case one can construct.


    Of course, the Methanex methanol product is much higher quality than what would be needed for transportation use and is thus much more expensive to produce. Also, gas prices are likely to rise faster than methanol prices in the future and methanol prices would undoubtedly drop if production volumes were to increase.


    So, the worst case still shows a reasonable savings for using methanol. Anything done to make this comparison more fair would result in granting greater advantage to methanol.
    19 Dec 2012, 03:00 PM Reply Like
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