Sasol Betting Big on Gas-to-Liquid Plant in U.S.

The following is an excerpt from an article in:


The New York Times
Tuesday, December 18, 2012

Sasol Betting Big on Gas-to-Liquid Plant in U.S.

By JOHN M. BRODER and CLIFFORD KRAUSS

RAS LAFFAN INDUSTRIAL CITY, Qatar — The compact assembly of towers, tubes and tanks that make up the Oryx natural gas processing plant is almost lost in a vast petrochemical complex that rises here like a hazy mirage from a vast ocean of sand.

But what is occurring at Oryx is a particular kind of alchemy that has tantalized scientists for nearly a century with prospects of transforming the energy landscape. Sasol, a chemical and synthetic fuels company based in South Africa, is converting natural gas to diesel fuel using a variation of a technology developed by German scientists in the 1920s.

Performing such chemical wizardry is exceedingly costly. But executives at Sasol and a partner, Qatar’s state-owned oil company, are betting that natural gas, which is abundant here, will become the dominant global fuel source over the next 50 years, oil will become scarcer and more expensive and global demand for transport fuels will grow.

Sasol executives say the company believes so strongly in the promise of this technology that this month, it announced plans to spend up to $14 billion to build the first gas-to-liquids plant in the United States, in Louisiana, supported by more than $2 billion in state incentives. A shale drilling boom in that region in the last five years has produced a glut of cheap gas, and the executives say Sasol can tap that supply to make diesel and other refined products at competitive prices.

Marjo Louw, president of Sasol Qatar, says that his company can produce diesel fuel that burns cleaner, costs less and creates less greenhouse gas pollution than fuel derived from crude oil.

“We believe the planets are aligned for G.T.L.,” Mr. Louw said during a recent tour of the Oryx plant. “Other players — much bigger players — will follow.”

Perhaps. So far, however, the record for converting gas to liquids is spotty.

The newest and largest plant in operation, Royal Dutch Shell’s giant Pearl plant, also in Qatar, cost the leviathan sum of $19 billion, more than three times its original projected cost, and has been plagued with unexpected maintenance problems. BP and ConocoPhillips built and briefly operated demonstration plants in Alaska and Oklahoma, but stopped short of full development of the technology. Exxon Mobil and ConocoPhillips announced plans to build giant plants in Qatar, but backed out, putting their capital instead into terminals to export liquefied natural gas.

Today only a handful of gas-to-liquids plants operate commercially, in Malaysia, South Africa and Qatar. Together they produce only a bit more than 200,000 barrels of fuels and lubricants a day — equivalent to less than 1 percent of global diesel demand.

“The reason you see so few G.T.L. plants is the economics are challenged at best,” said William M. Colton, Exxon Mobil’s vice president of corporate strategic planning. “We do not see it being a relevant source of fuels over the next 20 years.”

Many analysts and industry insiders say the technology makes sense only when oil and gas supplies and prices are far out of balance, as they are today in Qatar and the United States. When oil and gas come into alignment, gas-to-liquids ventures will become white elephants, these skeptics say. Environmentalists also say that the huge energy inputs required to transform natural gas into diesel or other fuels negate any greenhouse gas benefits.

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