NEW MARKETS & TECHNOLOGIES GTL IN FOCUS.

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1 NEW MARKETS & TECHNOLOGIES GTL IN FOCUS

2 Mega air separation units for the world largest gas-to-liquids (GTL) project in Qatar Qatar Shell GTL Ltd., a member of the Royal Dutch Shell Group, and Qatar Petroleum count on Linde Engineering s expertise for Pearl GTL in Qatar. In 2006 Linde was awarded with the turnkey contract to build eight large air separation plants for the Pearl GTL plant in Ras Laffan Industrial City, Qatar. When Pearl GTL the world s largest GTL facility went on stream in 2011, Qatar became the global GTL capital. The eight air separation plants produce 860,000 cubic metres of oxygen per hour, which are used to convert 140,000 barrels of natural gas into liquid hydrocarbons. As such, Pearl GTL is the largest integrated complex of its kind in the world. With this project Linde demonstrates once again that it is responding to the challenge of producing cleaner fuels and energy to meet increasing worldwide demand. Furthermore, the company confirms its leading position as a technology provider and EPC contractor. Linde AG Engineering Division, Dr.-Carl-von-Linde-Strasse 6 14, Pullach, Germany Phone , Fax , info@linde-le.com,

3 Overview CONTENTS 3 OVERVIEW GTL firms eye new markets 6 TECHNOLOGY New smaller-scale players enter GTL market 8 PEARL PROFILE Pearl GTL still generating work 10 PEARL INTERVIEW Q&A with Shell s Neil Gilmour 13 ORYX PROFILE Oryx GTL runs close to capacity 14 ORYX INTERVIEW Q&A with Sasol s Marjo Louw 16 PRODUCT INNOVATION Lucrative future for GTL 18 THE MEED LIST Six key figures leading the region s GTL market CONTACTS COVER ILLUSTRATION: IAN NAYLOR/ILLUSTRATION WEB. PHOTOGRAPH: SHELL MEED HEAD OFFICE Al-Thuraya Tower 1, 20th Floor, Offi ce 2004, Dubai Media City, PO Box 25960, Dubai, UAE Tel +971 (0) Fax +971 (0) fi rstname.surname@meed.com EDITORIAL Editorial Director Richard Thompson +971 (0) richard.thompson@ Editor (MEED magazine) Elizabeth Bains +971 (0) elizabeth.bains@ Supplements Editor Austyn Allison +971 (0) austyn.allison@ Production Editor Ken Campbell +971 (0) ken.campbell@ Sub Editor Ananda Shakespeare +971 (0) ananda.shakespeare@ Sub Editor Sneha Abraham +971 (0) sneha.abraham@ Art Editor Martin Staniszewski +971 (0) martin.staniszewski@ Contributors Dominic Dudley, Nancy el-khory, Marianne Makdisi, Richard Nield, Peter Salisbury ADVERTISEMENT SALES Sales Support and Europe Enquiries Monica D Souza +971 (0) Monica.dsouza@ Saudi Arabia Enquiries Ali Jaber +966 (0) / +971 (0) ali.jaber@ CUSTOMER SERVICES Retention and Client Relations Manager Mariam Mahmood +971 (0) mariam.mahmood@ MEED SUBSCRIPTION SERVICES Tel +44 (0) Fax +44 (0) meed@subscription.co.uk TOP RIGHT GROUP HEAD OFFICE The Prow, 1 Wilder Walk, London W1B 5AP, UK Tel +44 (0) For a full list of reader services, editorial and advertising contacts visit Member of the Audit Bureau of Circulation All rights reserved 2013 MEED Media FZ LLC, An EMAP Service part of Top Right Group Printed by Headley Brothers Ltd, UK Registered as a newspaper with the Post Offi ce ISSN SASOL AND SHELL EXPLORE NEW MARKETS FOR GTL The success of Qatar s Oryx GTL and Pearl GTL projects has led to a renewed interest in gas-to-liquid (GTL) investments, and the companies behind these plants Sasol of South Africa and the UK/ Dutch Shell Group are now eyeing new opportunities in markets much further afield. Production of GTL fuel is nothing new. It dates back to the 1920s, when two German scientists, Franz Fischer and Hans Tropsch, developed a means of making synthetic liquid fuel from the country s coal stock. The technology, which became known as the Fischer-Tropsch process, converts a synthesised mix of carbon monoxide and hydrogen (known as syngas) into liquid hydrocarbons. This is then cracked to produce fuels such as diesel and kerosene for use in the automotive and aviation sectors, and naphtha, which can be used to produce downstream chemicals. The early history of GTL was governed by simple economic logic. Production of synthetic fuel in Germany was ramped up significantly during the Second World War and, by 1944, the country had nine plants producing about 14,000 barrels a day (b/d) of GTL products for the war effort. Following the war, Russia lifted one of the plants to set up production of its own, although the plant closed in the 1990s. The second wave of GTL development was in South Africa, and again the move was moulded by political and economic circumstances. In the 1940s, South Africa had a lack of crude oil and limited means to import it. In order to fuel its automotive sector, it began investigating the use of its own coal resources to produce liquid fuels. In the 1950s, the country s first GTL plant was established in Sasolburg, with a second following in Secunda. By the 1980s, when apartheid-era sanctions against the government made importing refined products even more difficult, each plant was producing 80,000 b/d of liquid fuels. Strategic move The third, and most recent phase of GTL development, has been motivated less by economic necessity and more by the urge of one country to find ways to diversify away from its overwhelming reliance on its huge gas reserves. That country is Qatar, which has the third-largest gas reserves in the world, the fourth-largest gas production and the second-highest exports. It relies on oil and gas for about 50 per cent of gross domestic product (GDP), 85 per cent of export earnings and 70 per cent of government revenue. Sasol began discussions with Qatar in the mid-1990s for the construction of a GTL plant GTL MEED 3

4 Overview The pearl gtl process and products Natural gas liquids Ethane (~30,000 boe/d) LPG (~30,000 b/d) Condensate (~60,000 b/d) air separation UniT Oxygen Steam OffshOre platforms feed gas processing gasification Methane synthesis Syngas GTL reactor refining gtl products Naphtha and normal paraffin (~35,000 b/d) Base oil (~30,000 b/d) Gasoil (~50,000 b/d) Kerosene (~25,000 b/d) Utilities Utilities Utilities UTiliTies Power, water, steam, fuel gas, hydrogen Utilities boe/d=barrels of oil equivalent a day; b/d=barrels a day; LPG=Liquefied petroleum gas. Source: Shell and, by 2007, the Oryx plant was up and running. Output from the plant, which produces diesel, naphtha and liquefied petroleum gas (LPG), is now at about 32,400 b/d. Oryx was followed in 2011 by the Pearl GTL plant, developed by Shell, which began production in The Pearl plant produces a mix of diesel, kerosene, base oil, naphtha and paraffin. Energy efficient Aside from the strategic rationale behind the development of GTL, the fuel also has several inherent benefits. Chief among them is its low sulphur level, making it cleaner for the environment, and high cetane value (a measure of combustion quality), making it more productive of energy. But there are also significant challenges to developing GTL facilities, including high start-up costs and sensitivity to the price of oil and gas. Both the Oryx and Pearl plants had their problems, says Howard Rogers, director of natural gas research at the Oxford Institute for Energy Studies in the UK. Oryx was not so bad in retrospect, but Pearl suffered huge cost overruns, largely because it was built during the period when construction costs doubled because of the strain put on the supply chain by development in the BRIC countries, particularly China. At the moment, with oil in the region of $110 a barrel, the Oryx plant looks good economically at gas prices of $5 a million BTUs, says Rogers. The profitability of the Pearl plant is harder to assess because it s not possible to strip out the upstream costs from the plant construction costs. While Qatar offered the benefits of abundant cheap gas and a government keen to diversify into new products, the search is now on for other locations for the development of GTL production. The US is the focus of much attention because of the dissociation between the oil and gas market. At the moment, the country has the perfect combination of abundant supplies of cheap gas, high liquid fuels demand and high oil prices. Even there, though, project development is taking time. It s a bit of an open question today why we haven t seen GTL projects move forwards significantly in the US, says Rogers. Gas prices are low, at around $ [a million BTUs], but there s the obvious question of whether oil prices will stay so high in the future. At the moment, the futures market is in backwardation. So that s a risk. And then you have the fact that these are very complicated plants. You have to ask whether the costs at the Pearl were due to the complexity, or whether they were just a victim of price inflation at the time. It s quite daunting for potential investors. Russia is another potential location for GTL plants in the future. There s quite a lot of talk about GTL projects in Russia, where the domestic gas price is similar to that in the US. On the With oil in the region of $110 a barrel, the Oryx plant looks good economically at gas prices of $5 a million BTUs Howard Rogers, Oxford Institute for Energy Studies face of it, you d expect these projects in the US and Russia to be moving forwards, but the question is whether investors are put off by technical complexity and cost overruns. Exploration and production executives tend to get more excited about finding oil fields or gas fields rather than by converting one to the other. It s hard to think of a rationale today for converting natural gas into oil based simply on the fact that you can. Future projects Despite the challenges, Shell and Sasol are actively looking to exploit their technological expertise and the experience they have gained in Qatar by developing GTL facilities elsewhere in the world. Sasol is working with the US Chevron to build a plant in Nigeria, which is due for completion by the end of It has also partnered with Malaysia s Petronas to build a plant in Uzbekistan, for which the front-end engineering and design (feed) is complete. Shell and Sasol are both looking to develop GTL capacity in North America. Sasol has begun feed studies on a plant in Louisiana, and has carried out a feasibility study for a facility in Canada. Meanwhile, Shell has selected a site for a potential 140,000-b/d facility near Sorrento on the US Gulf coast. But all these schemes are still some way off. Sasol says it will make a final investment decision on its Louisiana facility in the next two years, and whether to start feed studies in Canada within a similar timeframe. Likewise, Shell expects it to be a few years before it makes a decision to go ahead with its proposals. Richard Nield 4 MEED GTL

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6 technology new players enter Gtl market Technology that allows for much smaller plants is being developed Until recently, if a company was thinking of building a gas-to-liquids (GTL) plant it meant one thing above all else: scale. The plants were physically large, needed copious amounts of gas feedstock and demanded big investments. The Oryx plant in Qatar, a joint venture of Qatar Petroleum (QP) and South Africa s Sasol, uses 330 million cubic feet a day (cf/d) of natural gas to produce 34,000 barrels a day (b/d) of diesel, naphtha and liquefied petroleum gas. The nearby Pearl project, a joint venture of Shell and QP, is even bigger. It uses 1.6 billion cf/d of gas to make 260,000 b/d of diesel and other products. Small-scale plants There are not many places with enough gas to allow for refineries of this size. South Africa and Malaysia are among the few other countries to have GTL plants, although new ones have been mooted for the US, Canada, Uzbekistan and Nigeria. But several companies are developing technology that is opening up the market at the other end of the scale. By using new techniques, they are able to develop plants that use much smaller volumes of gas. That means they can be deployed in hard-to-reach locations and exploit gas that is currently flared, reinjected into oil fields or left in the ground. And with a startup cost of about $200m, they are a small fraction of the almost $20bn that Shell s Pearl GTL cost to develop. What Shell and Sasol do are very large plants, and they re increasingly aiming to do larger and larger plants, says Roy Lipski, chief executive officer (CEO) of London-listed Velocys, one of the new band of companies. That s a niche market. I compare it to the space programme: it s only open to a very small number of players because of the price tag. And there are only a few locations on earth where you can secure enough gas. What we re trying to do is provide GTL for the mainstream of the industry. The scale we are targeting is 1,500-15,000 b/d of production, which requires million cf/d of gas. His space analogy is an apt one. Some of the technology that Velocys uses was developed at the Pacific Northwest National Laboratory for the US space programme. The scientists were trying to develop technology that could produce oxygen and fuel from resources found on Mars or the Moon. That required small, light chemical reactors New entrant: Velocys is developing lower-cost GTL plants for mainstream industry that could be easily transported. The micro-channel process reactor they developed lies at the heart of what Velocys now does. Not everything is so novel though. Velocys uses the same Fischer-Tropsch process, designed by German scientists in the 1920s that is also used by Shell and Sasol. This involves taking natural gas and splitting it into hydrogen and carbon monoxide. This synthesis gas (syngas) is then reassembled via the Fischer-Tropsch process into different length hydrocarbons to produce synthetic crude or syncrude, which can be further refined into diesel and other products. With its micro-channel reactor, Velocys can do all this on a far smaller scale than happens at Oryx or Pearl. In addition, its plants are modularised so they can be built in prefabricated pieces and then I compare [the market] to the space programme: it s only open to a very small number of players because of the price tag Roy Lipski, Velocys transported and assembled at the site where the gas is located. The technology is already being deployed in the US, where the local Pinto Energy is developing a GTL plant in Ohio. Its 2,800-b/d facility will convert natural gas from nearby shale reserves into fuel, solvents, lubricants and waxes, using Velocys technology. The plant is being built by the US Ventech Engineers International in Texas before being transported to Ohio for installation and should start up in early Interested customers Lipski says his company has at least 10 other requests from customers at various stages of development or evaluation, including from Calumet Specialty Products and Red Rock Biofuels in the US and British Airways in the UK. It has also built a demonstration plant for Brazilian national oil company Petrobras in the northeast of Brazil. But Velocys does not have this market all to itself. Other companies such as CompactGTL in the UK and Synfuels International and Primus Green Energy in the US are moving ahead with their technology. CompactGTL has also run a commercial demonstration plant for Petrobras. The plant was built in 2010 in Aracaju to process gas from offshore fields. Petrobras gave approval to the technology the following year. Like its rival, photograph: velocys 6 MEED GTL

7 CompactGTL is targeting the part of the market that the super-majors have ignored. The whole basis of Shell and Sasol is economies of scale. We can build smaller plants and modularise them, but the basic chemistry is the same, says Peter Riches, CEO of CompactGTL. We target plants under 10,000 b/d of liquid production. Our plants are half the size or smaller than those of Shell and Sasol. In October this year, Primus Green Energy also started up a demonstration plant at its New Jersey headquarters. The plant can produce 100,000 gallons (2,380 barrels) of gasoline a year and diesel and jet fuel lines are due to be added in Its CEO, Robert Johnsen, says it also expects to break ground on its first commercial plant next year, which will produce 25 million gallons (595,000 barrels) a year of gasoline, equivalent to just over 1,600 b/d. Cost-effective process Primus Green Energy uses a different chemical process to most others in the market. Instead of Fischer-Tropsch, it uses STG+, which stands for syngas-to-gasoline. This is an evolution of technology known as methanol-to-gasoline (MTG) developed in the US in the 1980s, which converts syngas into liquid methanol and then into gasoline. That technology did not take off, however, and few MTG plants have been built. The first was in New Zealand and ran from The STG+ process converts syngas directly into gasoline, avoiding the methanol stage, and Johnsen says it offers an advantage over competing systems. STG+ is so efficient that it is cost effective at scales as small as 400 b/d, which opens up an entirely new market for alternative fuel technologies, he says. Synfuels International has also developed a new process, first converting gas to acetylene, then to ethylene and finally to gasoline. It too has a small demonstration plant, in Texas. Their individual plants may be relatively small, but the potential market for these new GTL companies is not. Because of their size and relatively low costs, the plants can be deployed in places where, until now, no one has been able to exploit the gas, whether onshore or offshore. We think there s enough low-value feedstock in the size ranges we are targeting to make as much as 25 million b/d of fuel, says Lipski. If correct, that would be almost equivalent to the total oil production of the entire Middle East, which stood at 28 million b/d last year, according to UK oil major BP. While they wait for the market to take off, two of the firms are already in dispute, however. Velocys claims that CompactGTL is infringing some of its patents, a claim that Riches says his company FlarEd gas volumes (billion cubic METrEs) Russia Nigeria Iran Iraq US Algeria Kazakhstan Angola Saudi Arabia Venezuela China Canada Libya Indonesia Mexico Qatar Uzbekistan Malaysia Oman Egypt Rest of the world source: World Bank/National oceanic & atmospheric administration utterly and completely refutes. Unless a compromise can be struck, Lipski says, the case should reach the High Court in London in July next year. In the meantime, the firms are all competing for customers. The potential buyers of the technology range from small and medium-sized oil companies to refinery operators and independent project developers. To date, the greatest interest has been shown in the Americas, not least because of the shale boom in the US and the discovery of extremely deep offshore oil fields in Brazilian waters. But there should be opportunities in parts of Asia, Africa and the Middle East too. The most noise and publicity is in the Americas, says Riches. But the former Soviet Union has a big problem with flared gas and you can go to a lot of parts of the Far East and Australia. In terms of flaring, the worst offender is Russia, which burnt off 37.4 billion cubic metres of gas in 2011, according to the US National Oceanic & Atmospheric Administration. It was followed by Nigeria with 14.6 billion cubic metres, Iran at 11.4 billion cubic metres and Iraq at 9.4 billion cubic metres. However, opinion is divided on how promising the opportunities might be in the Middle East. The vast natural gas resources in the Middle East make it a natural long-term target for us Robert Johnsen, Primus Green Energy Generally speaking, many parts of the Middle East are gas poor, says Lipski. The consequence is that the opportunities for GTL are specific and niche. Having said that, I do believe there is a promising future all over the world for biomass-to-liquids, the ability to turn municipal, agricultural and household waste into usable fuels. Regional opportunities Johnsen is more optimistic, although the ownership structure of his company may make it difficult to do business in some countries in the region. The vast natural gas resources in the Middle East make it a natural long-term target for us, he says. Israel, for instance, which is the home of our primary investor IC Green, once had next to no domestic energy resources, but the recent discovery of offshore natural gas reserves that are far larger than previously believed is a game-changer for the economy. We could build small-scale plants for use at oil fields in the Middle East where hundreds of millions of dollars worth of associated natural gas are now being flared. For its part, Synfuels International has licensed exclusive marketing rights for its technology in the Middle East and North Africa, the former Soviet Union and the Indian subcontinent to Kuwait s Aref Energy. Only after the technology these companies offer has been rolled out on a larger scale will it become clear how viable their plans are; introducing new technology into a market is rarely straightforward. For Shell and Sasol at least, the gas volumes they are targeting means they do not represent a threat to the biggest GTL operators. Dominic Dudley GTL MEED 7

8 Profile Pearl GTl still GeneraTinG work Margin of return on the project is likely to be high Qatar is rapidly becoming one of the most exciting projects markets in the Middle East and North Africa (Mena) region, if not the world, with its ambitious plans to host the 2022 Fifa World Cup and a raft of huge industrial projects planned for the next decade. That ambition is not new. Indeed, by the time the football tournament is held, 20 years will have passed since Qatar Petroleum (QP), along with UK/Dutch Shell Group, made a statement of intent to lead the region in downstream gas technology. Their plan: to build fully integrated gas production and gas-to-liquids (GTL) facilities on a scale that had never been attempted before. The World Cup will also mark the 10th anniversary of that project coming to fruition, with the scheme producing 140,000 barrels a day (b/d) of petroleum products from late 2012 onwards, making it the biggest GTL facility in the world. Efficient processing The Pearl GTL project cost an estimated $19bn to complete, and linked 22 production wells and two offshore production platforms at the giant North Field gas reservoir with a huge process plant made up of a two-train gas processing unit, 24 reactors and world-scale refining, cracking and distillation facilities. At full capacity, the facility converts 1.6 billion cubic feet of natural gas a day into 30,000 barrels of naphtha, 25,000 barrels of kerosene, 50,000 barrels of gas oil and 30,000 barrels of base oils. The Pearl project was first announced in 2002, when QP and Shell released a formal statement of intent. Over the next year, the partners funded and completed seismic and feasibility studies before signing another agreement to continue work on the scheme. It was 2004 before they signed a binding development and production-sharing agreement. A year later, the US KBR and Japan s JGC completed front-end engineering and design (feed) studies for the project, and in 2005 and 2006 the partners tendered the main engineering, procurement and construction (EPC) projects. The construction contracts were tendered during a period of unprecedented regional demand for construction services and materials, and it was almost a year before QP and Shell decided the project was financially feasible, Huge: Pearl GTL cost an estimated $19bn to build despite the projected cost having trebled from initial estimates of about $5bn. In July 2006, the partners announced that they had made a final investment decision and moved to formally award EPC contracts. In August 2006, the US J Ray McDermott was awarded the main $450m offshore package on the project, the most important components of which were the construction of two offshore production platforms (Pearl 1 and Pearl 2), each connected to 11 production wellheads. In November of that year, the US company was awarded the contract to build two 30-inch pipelines connecting the platforms with the onshore Pearl facilities. Chiyoda Corporation and Hyundai Heavy Industries (HHI), of Japan and South Korea respectively, were awarded the $1.5bn EPC contract to build the two-train feed gas preparation plant to process the gas produced at the North Field so that it is ready to be converted into liquids. JGC and KBR were awarded the construction contract for the main processing plant. Because the facility uses proprietary Shell technology, this contract was not put to tender, but was directly awarded to the Japanese and US consortium, which had already worked on the feed design of the scheme. They also oversaw project management in a deal awarded in German s Linde won the $900m EPC deal for the main air separation unit at the plant, while Hyundai Engineering & Construction of key Pearl GTl contracts Project management contract JGC (Japan)/KBR (US) GTL process JGC/KBR Utilities JGC/KBR Jetty and pipeline corridor JGC/KBR Pipelines and platforms J Ray McDermott (US) Buildings Strabag (Austria) Storage tanks Chicago Bridge & Iron (US) Feed gas preparation Chiyoda (Japan)/Hyundai Heavy Industries (South Korea) Liquid processing unit Toyo (Japan)/Hyundai Engineering & Construction (South Korea) Air separation units Linde (Germany) Effluent treatment plant Al-Jaber (UAE)/Veolia (France)/Saipem (Italy) Main automation contract Honeywell (US) Cost-plus contract Unit price lump-sum turnkey contract South Korea and Toyo Engineering of Japan were awarded the $1.5bn contract to build a liquid processing unit to convert the gas liquids into petroleum products. Production ramp-up The Pearl GTL was commissioned in two phases, with production from the first processing train gradually ramped up in late 2010 and early The first shipment of GTL fuel left Qatar in June 2011 and the second train was brought onstream in late Shell said in 2006 the facility would produce 3 billion barrels of petroleum products over its working lifetime, at a cost of between $4-6 a barrel, with an implied cost of $12bn-18bn. Shell has since said that the overall development cost was $18bn-19bn, placing the average cost of a barrel of product at more than $6. But with crude oil averaging $100-plus on international markets in recent years, and the clean fuels the scheme produces attracting a premium over dirtier products, the margin of return on the project is likely to be high. The project has continued to generate work for contractors in the region, meanwhile, with a joint venture of the local Almana Trading and Chiyoda winning a major deal in May 2013 to provide feed and EPC services on all brownfield projects at the Pearl plant over the following four years. Peter Salisbury photograph: shell 8 MEED GTL

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10 Interview positive Impact on bottom line Q&A with Neil Gilmour, vice-president development, Shell Integrated Gas Why did Shell choose to invest in gas-to-liquids (GTL) in Qatar? Applying technology on this huge scale and investing so heavily in a single project does not happen everywhere in the world; it needs an enabling environment, and that enabling environment exists in Qatar. Not only is the country blessed with abundant gas resources, but it also possesses the leadership, decision-making and drive to deliver transparency in business dealings. For Shell s partner in the Pearl GTL, the State of Qatar, GTL technology has allowed for diversification, transforming decades worth of gas reserves into economic progress by opening up new markets and opportunities. The financial rationale behind GTL projects is often questioned. What made Qatar a viable place to invest? In addition to the above points, Qatar Petroleum acts as a real partner. There is a fundamental belief that working together for mutual success is the right approach. For how long has the Pearl GTL been producing, and with what output? Pearl GTL started up in March 2011 and the first shipment of gasoil was achieved in June of the same year. The project then produced a commercial cargo of naphtha in August and high-quality base oil in October The first cargo of normal paraffin, a chemical feedstock, was lifted in March In December 2012, the first GTL jet fuel shipment a blend of GTL kerosene and conventional jet fuel was loaded at Ras Laffan. Pearl achieved full production at 90 per cent or higher on both trains at the end of 2012, marking the completion of the ramp-up for this flagship project. The dimensions of Pearl GTL are truly staggering. The project covers an area of 250 hectares, and it took more than 500 million man-hours to design and build. At its peak, more than 52,000 workers were involved in the facility s construction. Some 2 million tonnes of freight were shipped and imported via a dedicated berth constructed by the project at Ras Laffan port. What is the product split? Pearl GTL converts up to 1.6 billion cubic feet a day of wellhead gas from 22 offshore wells in Gilmour: An enabling environment is essential Qatar s huge North Field using Shell s proprietary middle distillate synthesis process. From this, a range of high-performing GTL products is created: gasoil to be used as diesel fuel; kerosene to be used as jet fuel; base oil to be used for high-quality lubricants; and naphtha and normal paraffin for the petrochemicals industry. What price is Shell paying for Qatari gas? The details of the agreement are commercially sensitive and cannot be shared under the terms and conditions of the development and production-sharing agreement between Shell and the State of Qatar. Where are the different products from the plant marketed? Products are shipped to customers across the world; for example, gasoil is exported to Europe, naphtha and normal paraffin to East Asia and base oils to the US, Europe and China. Developing a Gtl project requires technical mastery, upstreamdownstream integration and financial strength Neil Gilmour, Shell Integrated Gas Is the project profitable? Pearl GTL is making a positive impact on our bottom line and recovering our sunk costs. What are the prospects for the development of the global GTL market in the future? GTL creates an additional route to monetise a country s natural gas resources by turning gas into high-quality liquid fuels and products. And with recent advances unlocking vast new supplies of natural gas across the globe, we see more and more opportunities for GTL. It is therefore not surprising that the GTL industry as a whole continues to develop an impressive portfolio of projects, at different sizes and stages of maturity. However, developing a GTL project is no simple feat and requires technical mastery, upstreamdownstream integration and financial strength. Shell is uniquely positioned to make it a success given our commercial capability, our in-house GTL technology (the culmination of four decades of research, development and commercial deployment), and our proven ability to successfully deliver integrated megaprojects. Which areas of the world are likely to show the greatest GTL demand? In many ways, GTL can be seen as complementary to traditional gas commercialisation routes for a country with abundant, affordable gas resources. It serves a very different set of markets and customers, with different price and demand dynamics and product logistics chains. Is there a sufficiently strong financial rationale for the development of further GTL projects? Shell s GTL capabilities unlock value from natural gas by converting it into valuable, high-quality liquid hydrocarbon products. This creates an additional route to monetise a country s natural gas resources and offers the full upside of accessing the oil markets. The long-term price of natural gas relative to that of oil is an important consideration. As such, it is potentially a valuable strategic diversification process for a country with abundant, affordable gas resources. Also, let s not forget that the GTL industry is relatively young and that process and product innovation continues, offering favourable prospects for longterm partnerships. photograph: shell 10 MEED GTL

11 What are the risks involved with investing in GTL? For Shell, this question is not about GTL technology, which we have sufficiently de-risked over the past 40 years. That said, applying GTL technology at a world scale as we have done, and investing so heavily in a project, does not happen everywhere in the world. It needs an enabling environment: collaborative partners and, of course, abundant gas resources. Shell strongly believes in the value of a comprehensively integrated approach to GTL projects. In our definition, this includes upstream production and development as well as downstream product marketing next to the GTL process itself. It equally includes consideration of technical, organisational, commercial, economic and political dimensions and, of course, extends to partners, contractors, local communities and other external stakeholders. How does Shell s GTL process work? At Shell, we are actively mastering GTL technology at all stages from the nanometre scale right through the products that are used around the world. The GTL process consists of three stages. In the first stage gasification synthesis gas (syngas), a mixture of hydrogen and carbon monoxide, is manufactured from natural gas by partial oxidation. Impurities are removed from the syngas. Shell s gasification process offers advantages in terms of selectivity, conversion level and thermal efficiency and provides a good fit with the Shell synthesis process. A second stage, known as Fischer-Tropsch synthesis, converts the syngas into liquid hydrocarbons using a catalyst. In this stage, a liquid is formed that looks and feels like wax at room PEARL GTL CONSTRUCTION TIMELINE temperature. Shell employs the Shell heavy paraffin synthesis process at this stage. This process uses a multi-tubular, fixed-bed technology that can easily be scaled. It gives a reliable separation between products and the catalyst, as well as a heavier product slate, which leads to better product properties. The final stage is hydrocracking and isomerisation, which cuts the molecule chains into shorter lengths. This yields high-quality liquids such as diesel, kerosene and lubricant oil. Shell s heavy paraffin conversion technology has been specifically developed for the unique properties of Fischer-Tropsch distillates and offers better yields, selectivity and flexibility than a standard refinery hydrocracking process. Shell HPC [heavy paraffin conversion] delivers a heavier (more valuable) product slate and allows for the production of high-quality base oils. What advantages does GTL have compared with conventional refined products? The first advantage of Shell s GTL products is that we are increasing the overall supply of highly demanded liquid hydrocarbons. We are also increasing security of supply as Pearl GTL is the world s largest source of high-quality GTL products. Each GTL product has specific advantages. For example, Shell s GTL gasoil, when used in automotive applications such as buses, can help improve local air quality by reducing emissions such as soot (particulates), when compared with conventional diesel fuel. When you consider heavily congested cities, we believe the benefits speak for themselves. The market does not differentiate between GTL and other refined products. Is it possible that there will be such differentiation in the future? Let s be clear: what matters most to customers is the performance of the final product and its benefits, not how products are presented or differentiated in the marketplace. For instance, GTL base oils have a number of advantages over traditional base oils. These include a better viscosity index, better low-temperature flow properties, better volatility and better oxidation stability. In other words, products formulated with Shell GTL base oils deliver less engine wear, better fuel economy, reduced motor oil consumption and longer service intervals, and therefore longer engine oil life. Simply put, our GTL products allow us to offer more products to the market as a whole and give Shell customers more product choice. Is Shell considering GTL projects elsewhere? We recently announced that we are exploring the possibility of building a 140,000 barrel-aday GTL facility on the US Gulf Coast. After much analysis, we have selected a site in Ascension Parish, near Sorrento, Louisiana, for this potential project. While an important step, we still have a great deal of additional work to do before deciding whether or not to build the proposed Gulf Coast GTL project. A decision is still years away. We use our experience, scale and innovation to offer resource holders sustainable integrated gas monetisation routes, for example, Prelude FLNG, the world s first floating liquefied natural gas facility, to be located off the coast of Australia, and of course Pearl GTL, the world s largest GTL plant, located in Qatar. We offer more choices than ever before and GTL is an integral part of our portfolio. Richard Nield Statement of intent between Shell and government of Qatar signed Development and production-sharing agreement (DPSA) signed; appraisal wells drilled Final investment decision; catalyst production begins; EPC contracts awarded; site preparation works and procurement commence Well drilling completed. Completion of fi rst train Second train completed Heads of agreement signed; seismic studies completed Front-end engineering design completed; permit to construct granted; project management contractor appointed; all EPC contracts tendered; synthesis reactors ordered; development drilling contract awarded Construction of plant and offshore platforms begins First gas fl owing from wells; fi rst sale of condensate and GTL product; start of DPSA; offi cial inauguration PHOTOGRAPH: SHELL EPC=Engineering, procurement and construction. Source: MEED GTL MEED 11

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13 Profile Oryx GTL runs close TO capacity The diesel produced has a sulphur content below 5 parts per million photograph: shutterstock As is often the way with highly complex infrastructure projects, Sasol s Oryx gasto-liquids (GTL) plant in Qatar was a long time in gestation. The South African company opened discussions with Qatar in 1996, but it was not until six years later, in 2003, that a lumpsum turnkey contract was finally signed for the construction of the facility. Construction work on the plant Qatar s first commercial GTL facility began in March the following year, yet was not without its teething problems. The construction phase was completed in 2006, but commissioning of the plant was delayed due to technical issues, and more specifically due to what Sasol officials described at the time as problems with a superheater on the unit. Full-scale operations eventually began in Complex project The plant also suffered from a difficult cost environment for construction work. Rising EPC [engineering, procurement and construction] costs and resource shortages in construction, logistics and procurement were the real challenges in implementing the Oryx GTL project, a large and technically complex project, said Italy s Technip, the EPC contractor on the scheme. More recently, though, operations have enjoyed a smoother ride. The plant is running close to its 32,400 barrel-a-day capacity, and sometimes a little over, and has run for more than two years without a lost-time outage. Qatar s venture into the GTL market was driven by a strategic decision to diversify away from its reliance on sales of liquefied natural gas, susceptible as they are to the variations of the global market. Although the volumes produced are relatively small, having GTL as part of its product mix gives the country the opportunity to take advantage of a global market in which oil is trading at a premium to gas. The Oryx plant converts gas from the giant North Field into diesel, naphtha and liquefied petroleum gas (LPG). Sasol operates the plant in a joint venture with the government s oil investment arm, Qatar Petroleum (QP). Sasol Synfuels International has a 49 per cent stake in the partnership, with QP holding the balance. Marketing is carried out in partnership with the US Chevron, under the Sasol Chevron brand. Technology: Oryx GTL uses the same Fischer-Tropsch process used in other Sasol plants Oryx GTL key numbers Plant area Equipment Concrete Steel structures Piping Equipment Instrument cables Electrical cables source: sasol 72 hectares 1,650 pieces 63,000 cubic metres 8,000 tonnes 12,800 tonnes 26,000 tonnes 1,200 kilometres 500 kilometres The plant incorporates three core technology units: synthesis-gas production, licensed by Haldor Topsoe, which creates a synthesised mix of carbon monoxide and hydrogen, commonly known as syngas; Fischer-Tropsch synthesis, licensed by Sasol, which converts the syngas into liquid hydrocarbons; and product work-up, licensed by Chevron, to separate out the diesel, naphtha and LPG. An array of ancillary processing facilities includes units for air separation, hydrogen production, heavy ends recovery, reaction water treatment and LPG clean-up. Technip carried out construction work in a two-phase process, comprising EPC work on the original plant and technological improvements following the start of operations. Construction work on the 72-hectare project was of mammoth proportions. At the peak of construction, 4,500 people from 15 different countries were working on the site, with the labour force putting in a total of almost 30 million man hours. Prefabricated piping weighing more than 4,500 tonnes was used, while some construction equipment components weighed up to 2,000 tonnes. Clean fuel The diesel produced by the plant, which accounts for about four-fifths of total output, is much cleaner than that typically produced by oil refineries. Diesel from the Oryx plant has a sulphur content below and usually significantly below 5 parts per million (ppm), compared with that typically marketed in Europe, the target threshold for which is 10ppm. The low sulphur content of the Oryx diesel makes it attractive as a blend stock to bring more sulphurous diesels below the threshold for sales in Europe. The bulk of the diesel is sold in northwest Europe, with a small amount sold to neighbouring countries in the Middle East. The naphtha is also exported, mainly to South Asia and the Far East, where it is used as a cracker feed for the manufacture of downstream chemicals, while the plant s LPG output is used to supply Qatar s domestic market. For the time being, the plant does not produce kerosene used to make aviation fuel but should it wish to undertake the necessary modifications, Sasol has approval to produce the fuel for use in an aviation fuel mix up to 50 per cent. Richard Nield GTL MEED 13

14 interview GTL ProjeCTs hold GreaT PoTeNTiaL Q&A with Marjo Louw, Sasol country president, Qatar Where did the gas-to-liquids (GTL) process originate? The concept of gas conversion from either natural gas or coal was devised in the early 1920s by two Germans called Franz Fischer and Hans Tropsch. At the time, Germany was short of fuel, so they decided on a process involving the gasification of coal, and then to liquid fuels. This method became known as the Fischer- Tropsch process. What is the history of Sasol s involvement in the production of GTL? In the late 1940s, South Africa had no crude oil of its own and a shortage of funds, so the government sought to develop a strategic project for the supply of fuels to the South African market. In the 1950s, it established a factory in a town called Sasolburg, using high-temperature technology to produce coal-to-liquids [CTL]. There were strategic reasons for its development, but the concept at the time was that it had to be profitable. It was discovered that lots of other chemicals could be produced using this process, such as ammonia, which can be used to make fertilisers, as well as other products such as solvents. During the international oil crisis in the 1970s, it became more difficult to import oil and refined products, so there was greater pressure to produce fuels locally. The government decided to privatise Sasol and, in 1979, it was listed on the Johannesburg Stock Exchange. There was just one smallish plant initially; this was followed by the completion of the Sasol 2 and Sasol 3 synfuels and chemicals complexes during the early 1980s. These two plants, located at Secunda, are now jointly called Sasol Synfuels. Each of the facilities produces 80,000 barrels a day (b/d) of fuels. By the early 1990s, the world market was opening up for Sasol. High-temperature gas conversion provides a range of products that you do not get with low-temperature technology, and from 1990 onwards we started to extract more and more chemicals. In 2003, Sasol was listed on the New York Stock Exchange. Louw: GTL promotes product diversification How did you come to invest in Qatar? It was at that time that we started to develop a low-temperature gas conversion technology suitable for diesel production that is unique to Sasol. We decided against its use in South Africa, but it was ideal for the conversion of natural gas in Qatar. They had just made a big gas find, and the development of gas was part of the former emir s 2012 Qatar National Research Strategy, which later became the Qatar National Vision According to the emir s vision, there would be a push for the production of liquefied natural gas, but gas development would also include the production of GTL in the monetisation of the country s huge gas reserves. Discussions with Qatar started in Were there any risks involved in developing a GTL project in Qatar? Not operating this version of the technology on a commercial scale meant that there was some technical risk. Different versions of the technol- We are working in Nigeria with Chevron and Nigerian National Petroleum Corporation to build a GTL plant Marjo Louw, Sasol ogy were proven on a much larger scale. But the systems and the type of reactor were new. Why did Qatar choose Sasol? Qatar evaluated several different possibilities for GTL. Sasol had the most experience, so Qatar Petroleum chose us to continue. We signed a joint venture around 2002, the plant was built by 2006, and it became fully operational by How much GTL is your Qatar plant producing, and did you have any issues with it? We had some unexpected technical challenges with the big scale up, which were well reported. But now the plant is running at its maximum capacity of 32,400 b/d. We have an excellent safety record and have not had a lost time incident for more than 800 days. On numerous occasions over the past two years we ve been running at above design capacity and, on average, we run at close to 90 per cent of capacity. Is the plant financially viable? It was justified in the early 2000s at an oil price of less than $20 a barrel, so it shows you what can be done. What products does the plant produce? What differentiates them from other refined fuels and where are they sold? The main products are diesel and naphtha. Diesel accounts for about 75 per cent of total production. It is more paraffinic than most diesels and more environmentally friendly. It has a high cetane value, which measures the energy it delivers. It is also very low in sulphur certainly less than 5 parts per million (ppm) and usually close to zero. The diesel is mainly exported to northwest Europe, and in the recent past to elsewhere in the Middle East. It s not being sold as a finished diesel; it carries a higher value if you sell it as a high-quality blend stock. Typically, it is acquired by blenders to meet European standards on sulphur content, which tend to be less than 10ppm. We also produce some naphtha, which is a very good cracker feed, and which is exported to South Asia and the Far East. We re getting a premium on the naphtha, but the percentage varies photograph: sasol 14 MEED GTL

15 SASOL GTL PROCESS AND PRODUCTS AIR SEPARATION SASOL S GTL TECHNOLOGY Sasol s GTL plants use the firm s Slurry Phase Distillate Process. Natural gas is reformed with oxygen to form syngas. Fischer-Tropsch conversion turns this into syncrude, which is cracked down to produce the final products. Oxygen Natural gas AUTOTHERMAL REFORMER Reforms natural gas Syngas SASOL SLURRY PHASE Fischer-Tropsch reactor Syncrude PRODUCT UPGRADING End product GTL=Gas-to-liquids; LPG=Liquefi ed petroleum gas. Source: Sasol Naphtha 5 20 GTL diesel % 75 LPG PHOTOGRAPH: SASOL on a shipment-by-shipment basis. And we produce some liquefied petroleum gas, which is piped for use in Qatar. We chose not to produce jet fuel in Qatar, but it is possible and we have approval to use GTL in jet fuel up to a maximum of 50 per cent. What other operations do you have? The fuels we produce in South Africa are fully fungible with regular refinery fuels. In the Highveld of South Africa, any fuels you buy will contain Sasol fuels. Sasol has agreements with all the OEMs [original equipment manufacturers] and we have also received approvals for jet fuel. Since 1999, virtually all the flights out of Johannesburg have used up to 50 per cent synthetic fuel [liquid fuel from coal, natural gas, oil shale, or biomass] and usually more than that. We are the only company with full OEM approval for 100 per cent synthetic jet fuel. What other operations are you developing? Today, we are working in Nigeria with [the US ] Chevron and Nigerian National Petroleum Corporation to build a GTL plant. We are busy with commissioning at the moment. It will be completed by the end of this year and will reach full capacity by mid We are also approaching a final investment decision in Uzbekistan for a larger plant than in Qatar, based on the same principles. We are working in a joint venture with Uzbekistan s national oil company and [Malaysia s] Petronas. The front-end engineering and design [feed] is almost complete and we re in the process of evaluations for the engineering, procurement and construction phase. Are you looking at any other markets? We are also looking at two more GTL facilities in the US, both in the same premises in Louisiana. The feed has started, and we re probably heading for a final investment decision in the next two to three years. Sasol currently has chemical facilities on the site and we are looking at building an additional chemicals complex with a cracker and downstream units. We have also finished a feasibility study in Canada and it is looking good. We are continuing with the permitting process. Due to resource constraints, we ll be doing the feed at a later date. I don t like to put a time to it; it s partly dependent on how fast we move forward. Are there other potential locations where GTL might be viable? We are doing a screening of a number of potential partners where the model could work, but we have to look at them on a site-by-site basis. There are a number of possibilities, but I m afraid I can t be more specific than that. How do you see the GTL market developing in the future? Sasol sees great potential for GTL. In North America, there are numerous opportunities because of the country s strategic position, new gas finds and the disassociation of the gas price from the oil price. It s an energy-short environment with an abundance of gas and a need for refined fuels. How do you ensure that a GTL project is viable? Whether a project is viable or not is highly dependent on what price you get for your product and what price you pay for your feedstock. It s a bit like asking whether crude will be profitable in the future without taking into account that the cost of production depends on where it is located and can vary from $10 to $115 a barrel. GTL production is not constrained by the size of market. At the very least, it will sell for the same price as the equivalent refined oil in terms of sulphur ppm. At the moment, there are five synthetic fuel plants in the world: two in Qatar, one in Malaysia and two in South Africa. They re all doing well. The technology itself is well established. The challenge lies in the operation of a combination of technologies. On the other hand, reaching the optimum running level takes time, so it can be a while before the value is maximised. GTL is a great way of making money from unmonetised gas and promoting product diversification. There are opportunities in North America and in places such as Uzbekistan, where there s a need for transport fuels, an abundance of gas and a shortage of liquid fuels. Richard Nield GTL MEED 15

16 Product innovation Lucrative future for GtL sector GTL providers seek new end-uses for their high-quality products Although its deployment in large-scale facilities is a relatively recent development, the predominant technology behind most of the world s gas-to-liquids (GTL) plants is not. The Fischer-Tropsch process, which six of the eight largest GTL producers use as their primary technology (of the major GTL technology providers, only the US ExxonMobil and Denmark s Haldor Topsoe use the alternative methanol-to-liquids process), was first developed in Germany in the 1920s, and was popularised during the Second World War, when it was used to convert coal to synthetic liquid fuels. The technology was adapted over the next six decades, with South Africa s Sasol and the UK/Dutch Shell Group experimenting with ways of using Fischer-Tropsch to convert natural gas into liquid fuel from the 1950s and 1970s onwards, respectively. They were still beaten in commercialising their patented technology by the US Mobil now ExxonMobil which provided its alternative methanol-to-gasoline (MTG) technology for a large-scale plant in New Zealand, commissioned in It was the early 1990s before major plants based on Fischer-Tropsch technology were commissioned in South Africa and Malaysia by Sasol and Shell. Since then, Fischer-Tropsch has become the dominant force in GTL technology. Ronald Sills, an expert in GTL technology and founder of the US XTL & DME Institute, which investigates the potential for the alternative methanol route, says this is mainly because Shell and Sasol have given financial backing to major Fischer-Tropsch-based projects. Even then, the total capacity of GTL plants worldwide is only 200,000 barrels a day (b/d). New applications But an unexpected glut of gas supply globally, coupled with growing demand for clean fuels such as those produced by GTL plants, and the success of Qatar s Oryx GTL and Pearl GTL schemes led by Sasol and Shell are proving large-scale GTL projects to be commercially viable, and interest is once again on the rise. Accompanying this is a new vigour on the part of the companies backing GTL projects to find additional end-uses for their high-quality products. Commercial use: The first Qatar Airways flight powered by GTL-based jet fuel took off in January 2013 Given the billions of dollars they have invested in GTL projects over the past decade, it is no surprise that Qatar Petroleum (QP) and its partners have been at the forefront of looking for new applications for GTL end-products, including naphtha, kerosene, gas oil and baseoils. In November 2007, France s Airbus, Qatar Airways, QP, Qatar Science & Technology Park (QSTP), the UK s Rolls-Royce, Shell and Qatar Fuel (Woqod) signed an agreement to explore the possibility of using synthetic GTL products as jet fuel. By October 2009, the first airplane using the GTL fuel had been flown successfully, leading the partners behind the initial consortium to sign another agreement with QSTP, Texas A&M University at Qatar, the UK s University of Sheffield, Shell, Rolls-Royce and the German Aerospace Centre to further investigate the commercial semi-synthetic jet fuel timeline 1991 sasol first visits american society for testing and Materials (astm) 1996 Discussions begin with astm and others; the us southwest research Institute (swri) brought in as independent technical consultants; testing is undertaken in the us and south africa 1997 swri submits its report 1998 the aviation Fuels committee, part of the uk s Ministry of Defence, gives its approval 1999 First batch of 50 per cent synthetic blend is certified at sasol s Natref refinery in south africa; semi-synthetic jet fuel is included in the uk Defence standards publication sasol semi-synthetic jet fuel (ssjf) is the only alternative to the common Jet a-1 fuel in commercial use 2010 heavy naphtha is approved as a component of ssjf 2011 synthetic paraffinic kerosene with aromatics is approved as ssjf component source: sasol photograph: shuterstock 16 MEED GTL

17 applications of GTL-based jet fuel. The project advanced quickly and, in January 2013, the first Qatar Airways flight powered by the new fuel which in September 2009 became the first new form of jet fuel to be internationally certified in more than 20 years took off from Doha airport, bound for London. [The fuel] will be supplied into the wider jet fuel pool at Doha International airport, enabling the State of Qatar to enjoy the benefits of this product, Mohammed bin Saleh al-sada, the Qatari energy and industry minister, who is also chairman and managing director of QP, told reporters at the launch of the flight, going on to describe the event as historic. Jet fuel is not the only innovative application for the GTL products coming out of the Oryx and Pearl plants. They are not only making diesel, jet fuel and naphtha, but lubricants and paraffins, says Sills. That gives you an example of what can be done with GTL. It makes very high technology lubricants. If you go to the auto store for lubricants, you ll see a range of quality from conventional to synthetics. There is really a market for high-quality lubricants. The quality of base oils the basic building block for lubricants is measured with a grading system that ranges from I, the lowest, to IV, the highest. Base oils rated at IV are extremely rare, and the III rating is the highest among most standard lubricants. High-quality base oils are normally expensive and costly to produce, but the output from the Pearl GTL plant reaches grade III specification with no need for additional refining after production because of the quality of fuel produced at the plant. Demand for higher-quality products has been rising in recent years (the share of group III lubricants in the global market rose from 5 per cent in 2005 to 7 per cent in 2010), and thanks to the low cost of natural gas and high oil prices, GTL-produced lubricants have become increasingly competitive. Different approach Sills is most excited by the possibilities for using GTL products as a form of transport fuel, an area where he believes the much under-represented methanol route of production could benefit. Fischer-Tropsch converts natural gas to diesel, jet fuel, naphtha, base oils and even synthetic crude oil, while the methanol route produces similar gasoline products or dimethyl ether (DME). There is already a significant use of DME as an LPG [liquefied petroleum gas] blendstock in China. It s like a drop-in fuel, he explains. [But] the new market is as a transportation fuel. It s an excellent diesel alternative. Since 2011, Sweden s Volvo has been road testing a small fleet of 10 trucks running on DME produced from black liquor, a by-product of the paper and cardboard production process. Carbon emissions from the trucks, which have now travelled more than 400,000 kilometres cumulatively, are up to 95 per cent lower than those from the most efficient modern trucks using conventional diesel. In June 2013, Volvo announced that it would begin producing a limited number of trucks running on DME in North America in partnership with the US Oberon Fuels, which is working to commercialise DME fuel in the US. The opportunities for GTL producers in the transport sector are not limited to DME, Sills adds. The big advantage is that the world is looking for alternatives to petroleum-derived fuels and fossil fuels, he says. But one intermediate step is looking for fuels from natural gas. There are many markets in the vehicle segment, but one big market is heavy-duty trucks, where the cost of the fuel and operation is less. There is an economic advantage, with crude at $100 a barrel, to using a natural gas. Natural gas in the US is relatively cheap, at about $4 a million BTUs. In the future, it delinks transportation fuel from crude oil. There is an environmental, an economic and a cultural driver behind this. Yet the most transformative GTL technology may not come downstream, but upstream, where a new wave of small-scale plants are being built around the world to help harness gas that is already being produced, but not used. The future of GTL, says Sills, is the tale of two scales: large and small. When planning new plants, firms have to take the cost of construction into account in order to calculate the average cost of production. GTL technology historically has been prohibitively expensive the Pearl GTL project cost about $20bn to develop and build so they need to be sure that the plants are operating at huge economies of scale. This is especially problematic because GTL plants operate well when close to capacity, but become difficult to run at lower rates. Recently, several new companies have started looking at opportunities to build plants using The new market [for dimethyl ether] is as a transportation fuel. It s an excellent diesel alternative Ronald Sills, XTL & DME Institute microchannel technology based on the Fischer- Tropsch method to process smaller amounts of gas at a lower cost than major GTL facilities. Neville Hargreaves, business development director at London-listed Velocys, one of the companies leading the charge into small-scale GTL plant technology, will not discuss specific numbers, but says that the cost of smaller plants runs into the hundreds of millions rather than billions of dollars. What we are about is changing the way fuels and chemicals are made, Hargreaves says. It s to do with small plants near where the resources are and GTL comes to the forefront of that. Economics for a chemical plant do not increase linearly; you need economies of scale. But with our technology, you change the size of the plant modularly. Game changer Velocys was formed through the 2008 merger of the US Velocys and the UK s Oxford Catalysts to try and leverage the reactor and catalyst technologies they had been developing independently of one another. It is this technology, Hargreaves says, that changes the GTL game. We have microchannel reactors, fixed tube reactors with very small tubes, he says. The tubes on large-scale plants run up to 60 feet. You can make the reactors as efficiently for a few thousand barrels a day as for a bigger plant. We have a proprietary catalyst that we have developed, which turns more of the feedstock into valuable products. It affects the whole plant. We are only one component of the plant, but what we provide affects the cost of production. Hargreaves company is focused on markets where large volumes of gas are being flared about 5 per cent of all gas produced annually worldwide is simply burned off but the domestic market for natural gas is not mature. Companies realise that they are wasting the gas, he says. It s a question of being able to do it at a cost. The gas is more or less free, with the constraint that production is linked to oil and gas. Along with the countries of the former Soviet Union, he sees the Middle East a huge source of flared gas as a potentially lucrative market, but cautions that the region s national oil companies tend to be conservative when it comes to new technologies. With natural gas selling at about $4 a million BTUs, oil at $100 a barrel and growing volumes of gas production in the US, GTL firms are confident that there is a lucrative commercial future for the technology. Peter Salisbury GTL MEED 17

18 The MEED List MiDDLE EasT GTL Six key figures behind Qatar s Oryx and Pearl GTL plants Mohammed bin Saleh al-sada PoSition Chairman and managing director, Qatar Petroleum (QP) BiograPhy Mohammed bin Saleh al-sada was retained as Qatar s energy and industry minister in the June 2013 cabinet reshuffle, ensuring the continuity of his policies in the country s oil and gas sector. He was first appointed to the position in January 2011, taking over from the long-serving Abdullah al-attiyah. As energy minister, Al-Sada also serves as the managing director and chairman of the board of state energy firm QP. Al-Sada previously served as minister of state for energy and industry affairs from He is vice-chairman of the board of Qatar Steel and chairman of Qatar Chemicals Company (Q-Chem), Qatargas and Qatar International Petroleum Marketing Company. Al-Sada is a former technical director of QP and managing director at RasGas. He has a bachelor s degree in marine science and geology from Qatar University, and a doctorate from the UK s University of Manchester Institute of Science and Technology. contact Tel: (+974) abdulrahman al-suwaidi PoSition Chief executive officer (CEO), Oryx GTL BiograPhy Abdulrahman al-suwaidi has been CEO of Oryx GTL since January He was seconded to Oryx in January 2007 from QP, where he had worked since At QP, he held technical and operational positions in offshore operations, before taking on managerial roles between 1998 and He was responsible for QP s gas processing and distribution facilities at Mesaieed, and then gas production and reinjection facilities located offshore and at Dukhan. In these roles, he oversaw production and maintenance, operations, inspection, engineering and production planning. Al-Suwaidi is a director on the board of RasGas, a member of the Dolphin Energy executive management committee, a member of the Ras Laffan chief executive committee and chairman of the Gas Processors Association GCC chapter. He has a degree in chemistry from Qatar University and a diploma in mechanical engineering from Bradford University in the UK. contact Tel: (+974) Marjo Louw PoSition Qatar country president, Sasol BiograPhy Marjo Louw is the country president in Qatar for South African GTL producer Sasol. In this role, he is instrumental in running Qatar s Oryx GTL plant, a joint venture between QP and Sasol. It was Qatar s first commercial GTL facility, beginning operations in Before taking over the company s Qatar operations in 2011, Louw was general manager of Sasol New Energy in Johannesburg, South Africa. He was previously managing director of Sasol Chemicals Pacific in Singapore from Prior to that, he was general manager for Europe at Merisol, a Sasol subsidiary specialising in chemicals production. He has spent 25 years working in the Middle East, Europe and the Asia-Pacific region, gaining experience in research and development, human resources, project management, marketing and sales, business development, market development, joint-venture management and general management. Louw has degrees in physical chemistry and business. contact Tel: (+974) Wael Sawan PoSition Managing director and chairman, Qatar Shell Companies BiograPhy Wael Sawan has spent most of his career at the UK/Dutch Shell Group, gaining experience in all of Shell s core business units: exploration and production; gas and power; and downstream. Sawan began his career with Shell in 1997 as an engineer with Petroleum Development Oman. He was posted to London as a Middle East and North Africa upstream business advisor, then took a break to complete his master s of business administration (MBA) at the US Harvard Business School. He rejoined Shell Gas & Power in the Hague, in the Netherlands, leading gas monetisation projects, before becoming general manager for acquisitions and divestments of Shell s global retail network in the company s downstream business. Sawan was appointed vice-president for commercial, new business development and liquefied natural gas in Qatar in He was promoted to his current position in April contact Tel: (+974) thani thamer Mohammad al-thani PoSition Deputy general manager, Qatar Shell BiograPhy Thani Thamer Mohammad al-thani has held the position of deputy general manager of Qatar Shell since He is the highest-ranking Qatari national in the company and worked on the $19bn Shell GTL project from its design phase through to execution. The plant was the biggest industrial project ever undertaken and runs at a 260,000 barrel-a-day capacity. Al-Thani was previously a senior petroleum engineer at QP, a role he held from During this time, he worked on QP s giant North Field and helped broker deals with local and international partners. He began his career at QP as an oil wells location engineer in In , he was seconded to Mobil Oil in Dallas in the US for a one-year training programme. Al-Thani has a bachelor s degree in oil engineering from the US University of Tulsa, and an MBA from the University of Hull in the UK. contact Tel: (+974) neil gilmour PoSition Vice-president of development, Shell Integrated Gas BiograPhy Neil Gilmour joined Shell International in 1986 and over the years has worked in its exploration, petroleum engineering, new ventures, commercial, mergers and acquisitions, and liquefied natural gas (LNG) and integrated gas divisions. He spent 10 years in technical roles, starting as a geophysicist and then leading large technical projects and teams, before taking on commercial leadership roles. In , he led the PetroChina Strategic Alliance, and later the upstream international restructuring team in Between 2010 and 2012, he headed Shell s floating LNG programme. In 2013, he took on his current role in Shell s new integrated gas organisation, where he oversees new business development and innovation programmes. Gilmour has a bachelor of science degree in geology from Glasgow University and a master s of science in exploration geophysics from Leeds University, both in the UK. contact Tel: (+65) MEED GTL

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