One Gas-to-Liquids Plant to Yield $6 Billion Profit Per Year

Shell's Pearl GTL Plant in QatarThe new gas to liquids plant in Qatar is the equivalent of a new giant oil field, in terms of production. But rather than producing crude oil, its main products are finished diesel and kerosene (jet fuel). It cost about $18 billion to build, and along with a smaller associated lng plant, will yield $6 billion a year in profits on a projected cost of $70 per barrel oil. It will produce over one quarter of a million barrels of fuel per day when fully operational.

At a cost of at least US$18 billion (Dh66.11bn), Shell is putting the finishing touches to a gigantic gas-to-liquids (GTL) plant. Once it is fully operational, which is expected to be by early next year, the Pearl GTL project will produce a total of 260,000 barrels per day (bpd) of marketable output, much of which will be products such as gasoil, a form of diesel, and kerosene, to be used as aviation fuel. Pearl is by far the biggest industrial hydrocarbons project to date. Over the life of the plant, it will process 3 billion barrels of oil equivalent of gas.

By entering a production sharing agreement with the state-owned Qatar Petroleum, Shell is funding the entire project but will be able to recover the investment costs as well as receive a share of the profits.

The company estimates that at an oil price of $70 a barrel, the project, together with a $2bn liquefied natural gas plant also operated by Shell, will yield it a profit of $6bn a year.

Yet by fronting the entire amount itself, Shell took a big gamble on Pearl. GTL technology had so far been used commercially only by two companies, on a much smaller scale: South Africa's Sasol, who pioneered the technology during the sanctions under the apartheid era; and Shell itself, which is running a 14,700 bpd plant in Bintulu, Malaysia. _National

If the cost of oil is much higher than $70 a barrel, the plant will earn profits of much more than $6 billion per year.

Peak oil gurus have been predicting that oil prices of $200 to $500 per barrel will happen "any day now." At those prices, such large gas-to-liquids plants could pay for themselves in one year or less. Imagine being able to build a plant that outputs finished fuels in volumes of a giant oil field. Under those circumstances, you only need to find a lot of gas -- which is quite a bit easier than finding large oil fields.

I am not saying that natural gas -- and later, methane hydrates -- will replace oil. But gas to liquids will provide an extremely useful supplementary source for diesel, jet fuel, and gasoline (via the MTG process).

It will not be necessary to build such giant plants, either. Oxford Catalysts' microchannel F-T reactors are scalable, and can be used on offshore rigs to utilise otherwise flared, and can turn stranded gas fields into highly profitable liquid fuel producers.

This approach (GTL via F-T and MTG) is only one way in which humans plan to compensate for the various political and market reasons that oil is currently overpriced.