GTL '14: CompactGTL chief details small-scale progress, impediments
By ADRIENNE BLUME
HOUSTON -- Iain Baxter, chief operating officer of CompactGTL, kicked off Gulf Publishing Company's second annual GTL Technology Forum on Wednesday with a keynote speech examining recent GTL developments.
Quite a bit of positive propaganda on small-scale natural gas processing and GTL production has been seen in the media lately, Mr. Baxter said. The world is awash in supply; US gas prices are forecast to remain low in comparison with liquid fuel prices; there have been moves to reduce gas flaring in upstream operations; technology developments have enabled higher-value fuels to be produced from waste feedstocks; and several environmental and political drivers exist for the commercialization of small-scale GTL technologies, in which a substantial amount of capital has been invested.
Although all of these factors are present, progress is still slow, and it is not moving at the pace one would expect, given these compelling arguments. "So, is there an elephant in the room, and if so, what is it? Is there more than one elephant in the room?" Mr. Baxter posited.
Large scale vs. small scale. With large volumes of gas and long distances to market, LNG exports and pipelines make sense and work well. However, if the transport distance is short and the gas volume is small, then small-scale GTL makes sense, Mr. Baxter said. Small gas volumes cannot support the large capital expenditures needed for infrastructure projects, and short distances to market do not warrant the construction of expensive transport infrastructure.
For these reasons, large volumes of gas are reinjected "just to get rid of it," the COO said. In some areas, this associated gas is holding up or frustrating crude oil production. However, there is a vast opportunity for small-scale gas processing in stranded oil reserves, with over 500 Tcf of stranded gas available worldwide.
Roadblocks to groundbreaking. "So, that's the big picture, but what are the real issues in terms of getting projects off the ground?" Mr. Baxter said. One issue is the realizable gas cost at individual project locations. In the upstream sector, there is low-cost, zero-cost and even negative-cost gas available for exploitation. However, project sites are critical with respect to gas flow continuity; significant oil field development is needed to maintain enough streams coming in from multiple flows to support adequate gas flows for GTL operations.
Another issue to getting projects off the ground is that national gas transmission companies often limit gas sales by producers, posing a roadblock to the setup of small-scale GTL operations. Also, midstream companies often cheaply extract NGL from associated gas, make money on the liquids, and then leave behind dry gas, Mr. Baxter explained.
Other issues concern product offtake. Certification is needed for fuels, a realizable netback value must be ascertained, taxes must be considered and an export infrastructure must be guaranteed. On this last point, Mr. Baxter gave the example of producing diesel from affordable gas in a remote location. Responsibility for ascertaining adequate infrastructure to carry the diesel where it needs to go will fall on the shoulders of the project developers, he said.
Technology challenges. Issues with small-scale GTL operations include the need for a demonstrable, fully integrated process from the inside out, rather than a Fischer-Tropsch (FT) "island." Such an integrated process includes utilities, syngas generation technology, an air separation system, a steam system, a water treatment facility and power generation.
CompactGTL has several years of experience from its Brazil demonstration plant for utilities preparation and operation, especially with regard to failure scenarios. Remote small-scale projects require two-stage FT technology, making single-stage fixed-bed reactors unsuitable.
Another technology challenge is the need for modular units, rather than "modularized" construction. Standard, pre-engineered equipment from oil and gas operations is not suitable for small-scale GTL operations.
Lastly, Mr. Baxter labeled catalyst life and replacement as "one of the elephants in the room." FT catalyst replacement in-situ would shut the whole plant down. One solution to this problem is to exchange reactor modules in pairs for spare reactors. In this way, the plant continues to operate and there are no catalyst handling and safety issues on the operational side. High availability and low OPEX are the rewards of this method.
Project development. Mr. Baxter acknowledged that the first project is key to developing any new technology concept. In the realm of financing, projects must provide enough economic headroom for financing costs. The cost of financing will be higher in the early stages because the technology is new, and there will be intense competition for capital.
Early projects are inherently entrepreneurial, the COO explained. It is difficult to convince oil and gas producers to invest in small-scale technology solutions to gas flaring when they could be investing money in additional oil and gas production. Bankable technology will be available for the projects beyond the inaugural one, making the success of the first project key. High returns are needed to overcome very high competition for capital.
Kazakhstan venture. CompactGTL recently announced a $300-MM, small-scale GTL project in Kazakhstan. Oil and gas is crucial to the country's economy, as it is a large country with a small population. Gas flaring is a prominent issue in Kazakhstan, Mr. Baxter acknowledged. There are numerous remote fields, but the gas is far from infrastructure and population centers.
CompactGTL has designed a fully integrated plant in a remote location for its Kazakhstan project. The company will provide turnkey services, and the engineering support partner is Fluor. An EPC contractor will be named at a later date. CompactGTL aims to begin operations in Kazakhstan by the end of 2017, Mr. Baxter said.
New gas processing project announcements have slowed due to energy price uncertainty and the downturn in the oil market.
Executive Q&A viewpoint
The GTL market has seen new and smaller-scale technologies emerge over the past several years as production of liquid fuels from natural gas becomes more customized and localized.
Although LNG prices have hit a record low and capital costs of new production terminals continue to rise, a significant amount of pressure is on the industry to increase capacity by improving existing plant efficiencies and constructing more facilities.
Russia is considering a significant increase in LNG exports to Africa and the Middle East over the next several years, according to the Russian Ministry of Energy.
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