Technology to convert natural gas to liquid fuel has been around for decades and is in widespread use around the world, but gas-to-liquids plants are almost unheard of in the U.S. That could be about to change.
Two companies recently announced plans to construct small-scale gas-to-liquids, or GTL, projects, one in eastern Kentucky and a second in Colorado. Prestonsburg, Ky.-based RCL Chemical recently said it finalized an agreement with New York City investment company Y2X Infrastructure to secure $325 million to construct the first of three facilities to be located in Floyd County, Ky.
The project is expected to be operational by 2020 and will produce synthetic "high-purity fuels" for local consumption. Developers expect to break ground in the fourth quarter of 2018, RCL Chemical said. The company did not reveal any details about the size and capacity of the proposed facility or where it planned to source its natural gas feedstock. A company spokesman said it was too early to provide those details.
Earlier this month, during a first-quarter earnings call, officials with exploration and production company SandRidge Energy Inc. said they signed an agreement with Advantage Midstream to build a small-scale, modular GTL processing facility at the Big Horn tank battery in the North Park Basin oilfield in Colorado.
The pilot facility will process about 500 Mcf/d of natural gas into marketable synthetic diesel and gasoline while eliminating the need for flaring the gas.
While large-scale GTL projects are used to monetize stranded volumes of gas in countries such as South Africa and Uzbekistan, the two small-scale GTL projects are apparent outliers for a U.S. gas industry that has relied almost exclusively on the nation's extensive network of pipelines to move gas to markets.
According to the U.S. Energy Information Administration, GTL plants typically use the Fischer-Tropsch Process to convert natural gas to petroleum products such as synthetic gasoline and diesel fuel.
Large-scale GTL plants can be in countries with large resources of gas located far from pipeline infrastructure such as South Africa, Qatar, Malaysia and Nigeria. These plants typically have output capacities ranging from 5,600 barrels per day to 140,000 bbl/d. By contrast, GTL plants in the U.S. are considered microplants by the EIA because of their small output volumes.
BP PLC operated a 300 bbl/d pilot plant in Alaska from 2002 to 2009. The first micro GTL plant still in operation in the U.S. was completed in September 2016. The plant, built by ENVIA Energy, is in Oklahoma and converts landfill gas into liquid petroleum products. Another U.S. micro-GTL plant in Wharton, Texas, has a processing capacity of 100 bbl/d.
"The adoption of the technology has not really taken off in the United States," EIA analyst Warren Wilczewski said in an interview May 16. "The adoption of the technology is entirely reliant on the assumption of a permanent wide spread between natural gas and crude oil prices."
Wilczewski said GTL project developers typically look for regions where the differential between gas and oil prices is expected to remain persistent for a long time "because these projects are high capital-intensive."
"You're going to invest a lot of money, and even if it's a small project, per volume of gas produced, it's still a lot of money," he said.
For example, he said that in order for a company to build a facility capable of processing 200 MMcf/d of gas from a stranded gas field, the company must assume that no one is going to come along in a few years and build a gas pipeline to that field, thereby making the GTL project uneconomical.
Jim Magill is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.