GTL: the 'other' alternative fuel: commercializing North slope natural gas reserves.

AuthorBradner, Mike
PositionOIL & GAS

For years, oil and gas companies have struggled with how to commercialize the large natural gas reserves on the North Slope. The latest effort, a pipeline to southcentral Alaska and a large liquefied natural gas (LNG) export plant, is being worked on seriously, but the same obstacles loom that blocked earlier efforts--huge costs, competition from other LNG, and uncertainties in the market and the tax regime in Alaska.

Costs estimated by the consortium working on this project--BP, ConocoPhillips, ExxonMobil, and TransCanada Corporation--estimate the project could cost over $50 billion.

Is there another way? Is an expensive pipeline and costly LNG plant the only way to do this?

Other Options

There are other options, and there are some who believe those may become more attractive if the current effort on a pipeline and LNG plant bogs down once again.

The alternative is gas-to-liquids (GTL), a process to convert natural gas to liquid products like an ultra-clean diesel (or even just a synthetic crude oil) that could be shipped through the Trans-Alaska Pipeline, either in batches of product in the pipeline or mixed with crude oil. TAPS is now operating at about one-fourth of its original capacity of 2 million barrels per day, so there is plenty of room in the pipeline.

If large GTL plants on the North Slope were built, the biggest obstacle, an expensive eight hundred-mile pipeline, would be eliminated because the liquid products would be shipped through the existing oil pipeline.

There are complications, of course, because nothing like this is simple. The plants making the GTL conversion are complex and expensive, and building them on the North Slope makes them all the more costly.

However, the benefits could be substantial. The main benefit is that the liquid products produced by GTL plants, whether a synthetic crude oil or a finished diesel, sell for far higher prices in the market, on an energy-unit value, than does natural gas.

They could also be transported to market through an established pipeline that is three-quarters empty. However, if the liquids produced are sent in batches, procedures not uncommon in many Lower 48 pipelines, some modifications to TAPS will be needed.

Old Technology

GTL technology is not new. The basic chemical reaction, known as the Fischer--Tropsch process, was discovered in Germany in 1925. Essentially, the process occurs in three stages. The first stage involves a gas reformer, which breaks the methane, the main...

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