Gas to Liquids (GTL) Coming to Canada via South Africa

Sasol figures that the natural gas needed for a gallon of diesel, plus operating costs, comes to about $1.50 a gallon. In comparison, a gallon of diesel made from crude oil now costs more than $2, even before refining, and many forecasts are for the price of oil to go higher.

...A barrel of oil has historically cost one to two times as much as the equivalent amount of energy from natural gas. But right now, vast supplies of natural gas from shale formations in North America have driven prices down, so oil is triple the price of the gas equivalent.

The new ratio creates “a very attractive economic option,” said Lean Strauss, senior group executive at Sasol. _NYT_via_EnergyTribune

South Africa's SASOL learned to create synthetic diesel back during apartheid days, when the rest of the world refused to trade with South Africa. Now, SASOL intends to bring its synthetic diesel technology to Canada, to turn the "shale gas bonanza" into a veritable GTL financial gusher.

More from NYT (via EnergyTribune) and Business Daily:

Diesel and jet fuel are usually made from crude oil. But with oil prices rising even as a glut of natural gas keeps prices for that fuel extraordinarily cheap, a bit of expensive alchemy is suddenly starting to look financially appealing: turning natural gas into liquid fuels.

A South African firm, Sasol, announced Monday that it would spend just over 1 billion Canadian dollars to buy a half-interest in a Canadian shale gas field, so it can explore turning natural gas into diesel and other liquids. Sasol’s proprietary conversion technology was developed decades ago to help the apartheid government of South Africa survive an international oil embargo...

The Sasol process cooks a hydrocarbon, either coal or natural gas, into a fuel gas made of hydrogen and carbon monoxide. Using a patented process that involves cobalt catalysts, it converts that gas into a mix of liquids: 80 percent diesel fuel, 15 percent naphtha and 5 percent liquid propane.

...with the huge spread between oil and gas prices, and predictions of oil topping $100 a barrel next year, the conversion technology could be a “a money-maker for whoever is a first mover in that space.” _NYT

It is a question of cheap, reliable feedstock supplies combined with an efficient industrial process and a good market for liquid fuels. At this time, SASOL has access to cheap, plentiful feedstock AND a good market for liquid fuels. They will now have to prove the industrial ability to economically convert cheap, plentiful shale gas into more valuable liquid fuels.

It is a wise move for SASOL to develop such a plant in North America, with ready access to competent engineers, technologists, and craftsmen, as well as easy access to the US energy market.

[SASOL], which announced a 50% acquisition of a stake in Canadian shale gas company Talisman Energy for R7,1bn on Monday, is also exploring for shale gas in SA’s Karoo basin, although any production is at least 10 years away. "It’s a long shot, but it could be a game-changer," Mr Haan said. Reuters _BusinessDay