CNG Isn’t The Only Way To Make Natural Gas A Transportation Fuel

That’s the message from Shell, regarding a major project the company has developed in Qatar which refines natural gas into liquid fuel products nearly indistinguishable from those produced out of crude oil. That message could be a significant one for Louisiana, as it involves what might result in the largest industrial investment and job-creation engine in the state in two generations, and soon.

The upshot? Creating diesel, jet fuel and gasoline from natural gas is a cost-effective alternative to the heavy lift required to transfer the national transportation-fuel infrastructure from oil-based fuels to compressed natural gas – although, as the recent announcement by GE and Chesapeake to expand CNG infrastructure shows, that project is ongoing as well.

The process is called GTL (gas-to-liquids), and its advantage is that its products move through the existing infrastructure. And the vast chasm between the price of natural gas and crude oil makes GTL a prospectively revolutionary and profitable enterprise even with a more elaborate refining process.

Shell’s Pearl GTL project in Qata produces 140,000 barrels a day of liquid fuels as an end product from offshore natural gas wells in the North Field, which is off Qatar’s coast in the Persian Gulf. Here’s a short video about the Pearl GTL project…

Turning “dry gas,” otherwise known as methane, into products one might expect from a traditional oil refinery is a bit more elaborate process than normal. The GTL project Shell put together in Qatar involves a three-stage process not dissimilar to coal gasification – which can result in the creation of diesel and gasoline from coal.

In the first stage, methane from the gas wells in the North Field is combined with pure oxygen brought forth from the world’s largest air separators located on site, resulting in a mix of carbon monoxide and hydrogen (known as syngas) and a large release of heat which is captured in steam – which helps to generate power to run the plant and even to export into the local power grid (between 50 and 300 megawatts).

In the second stage, a cobalt catalytic reactor turns that syngas into waxy long-chain hydrocarbons known as parrafins; a room temperature the substance is akin to a hard tar, but it’s a liquid at the high temperatures in the facility.

And in the third stage the waxy hydrocarbons are put through a normal refinery process, from which Shell produces kerosene for jet fuel, naptha for gasoline, a far higher-grade of diesel fuel than a typical refinery produces and some of the best industrial lubricants on earth.

Shell says natural gas is a nearly perfect feedstock because it doesn’t contain the impurities coal or even crude oil contain. As such the diesel the Pearl GTL plant produces has no soot associated with it, and it’s a much cleaner-burning fuel.

But here’s where it gets interesting. The Pearl GTL project, which cost $16 billion to construct and which employs some 52,000 workers in Qatar, has a problem of location. The products it makes are in demand, but the markets for those products are generally nowhere near Qatar. They’re in Europe, or America, or the Far East.

As such, the word is Shell is going to build a new GTL facility, on par with the size of Pearl, in America so as to take advantage of the more localized demand. And the word is within three to six months, Shell expects to announce a decision on a site somewhere on the Gulf Coast. And Louisiana, with its plentiful supplies of “dry gas” coming out of the Haynesville Shale and its world-class natural gas infrastructure, could very well win out as the domicile for the facility. Within 18 months of the site selection Shell expects to finalize its construction plans, and it’s expected that four years later a GTL facility which employs some 10,000-12,000 permanent workers will go on line.

Considering that it’s been 40 years since a new refinery has been built in the United States, this could be a colossal piece of news for the region. It’s also a significant piece of news for the natural gas industry – because Shell anticipates its American facility will take in some 1.3 billion cubic feet of natural gas per day, and that could be enough to move the price of natural gas upward. Which is good news for landowners in places like the Haynesville Shale, who are disappointed to see wells shut in thanks to the current poor prices for gas.

Shell’s plans could provide another outlet for America’s shale gas revolution, a significant boost to America’s refining capacity, a boon for the construction industry in the Gulf Coast region and a game-changing job creation engine for the community its facility ultimately is sited in.

And the decision on which community that might be will come by this fall.

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