Winnipeg: The Frontier Centre for Public Policy today released Natural Gas-to-Liquids Coming to the U.S. In this policy study, Ian Madsen, CFA, examines an array of likely implications for the wider commercial availability of transport fuel derived from natural gas. South Africa-based Sasol announced it is initiating an 18-month feasibility study exploring whether to build a two million tons per annum or a four million ton per annum gas-to-liquid (GTL) production facility in Louisiana, U.S.A.
This first GTL facility in the Western Hemisphere would produce liquids for diesel and jet fuel.
The paper places the potential production in the context of the fuel consumption market as well as in the context of the natural gas production market. While even four million tons would represent a small share of the amount of fuel consumed each year in the United States, the operation of such a plant has the potential of being a game changer in the energy field. It can increase the availability of less expensive and cleaner forms of energy capable of delivering a fuel strong enough to power jet engines and in a much more user-friendly fashion. Overcoming these traditional obstacles of alternative fuels will go a long way in opening markets for the massive quantities of natural gas available. Madsen writes:
“This new development is extremely positive from a standpoint of encouraging the demand for and consumption of natural gas in a different and much more user-friendly form. Truckers, bus lines, delivery companies, railroads and airlines do not have to change anything about how they operate. In fact, the diesel and aviation fuel from GTL plants, as demonstrated by the ones already built, separately, by Sasol and Royal Dutch Shell in Qatar, have less contaminants than ‘natural’ kerosene fuels refined from crude oil, and burn cleaner, too.”
Notwithstanding the comparatively small initial amounts involved, GTL production in continental United States would have the added benefit of enhancing the American strategic position in the face of oil imports from abroad, Madsen points out.
New GTL plants in the US would have implications for Canada. Environmentalists and industrialists should welcome the news.The ongoing natural gas glut in the U.S. has backed up natural gas volumes in Canada and has lowered prices, reducing oil and gas company profits, and lowering the royalty revenues that provincial governments receive.This development puts pressure on Canada’s oil industry employment and on provincial finances.
However, the excess gas is a boon to oil sands producers, reducing processing costs, lowering the cost of diluting bitumen for shipment through pipelines to southern markets, and making upgrading to higher value synthetic crude more economical.Nevertheless, the huge and still-burgeoning output of cheap shale gas from the U.S. is threatening the viability of some Canadian companies, so any sign of a new, perhaps fast growing offtake of some of this excess gas is very welcome, and could be just the start of a big new industry.
Download a copy of Natural Gas-to-Liquids Coming to the U.S. HERE.
For more information and to arrange an interview with the study's author, media (only) should contact:
Ian Madsen, CFA