Qatar and Sasol See New $900 Million GTL Plant as the Start of Something Big Upstream and Downstream

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). In a presentation at the Deutsche Bank Oil and Gas conference in September, Pat Davies, executive director of fuels and chemicals group, Sasol (NYSE:SSY) (Johannesburg, South Africa), showed a world map with the locations of a total of 2,000 trillion cubic feet of uncommitted gas reserves which he said, in terms of gas to liquid (GTL) conversion, represented 360 billion barrels of oil equivalent. With the GTL process producing 75% diesel fuel and 25% naphtha, the conversion of one trillion cubic feet of gas reserves over a thirty year period would be equivalent to 10,000 barrels of fuel per day over the period.

On the Sasol world uncommitted reserves map the locations, excluding North America, were as follows: Northern and North Eastern Russia - 900 tcf; Middle East and Arab states - 816 tcf; West Africa - 124 tcf; Gulf and Carribbean - 100 tcf; North Africa and Mediterranean -160 tcf; South America 70 tcf and Indonesia and Australia 65 tcf.

Reflecting the great potential for the GTL technology Sasol-Chevron (NYSE:CVX) (San Ramon, California) is developing the Escravos GTL plant in Nigeria that will have a capacity of 34,000 bpd using gas that is currently being flared as feedstock. Sasol and its partners are targeting 500,000 bpd in ten years from the GTL process and are currently evaluating a number of opportunities that include Australasia, the Caribbean, a feasibility study on a plant in Iran and possible Russian projects in the future.

In Qatar the company is moving ahead with the Oryx GTL plant. At the project's foundation stone laying ceremony early in December Qatar's minerals and energy minister Abdullah bin Hamad al-Attiyah said that the project marked his country's commitment to become the GTL capital of the world.

"When completed in 2005, the Oryx GTL plant will be the most technically advanced gas-to-liquids plant in the world, using 300 mcf (million cubic feet) per day of lean gas," the minister said. He also predicted that in 2007, revenue in Qatar from gas related industries would surpass that from oil and its bye-products.

Speaking at the ceremony, Sasol CEO, Pieter Cox predicted that the $900 million dollar Oryx plant could be expanded into a project that could be worth tens of billions of dollars. He said that the plant could grow to be a Secunda (PEC 85000068) in the desert. Secunda is the company's gas, fuel, and chemicals plant in South Africa's Free State province. It was first established as a company town and plant in the 1970's following the success of Sasolburg, the first company town in the Free State, which started producing fuel from coal in the 1950s. (PEC 85000027/81/82/84/85/100/150/173/174)

Cox said that he hoped that there would be further expansion in Qatar, with potential production from the GTL plant rising from the 34,000 bpd in two years time to six times that level, at about 200,000 bpd. The Qataris are keen to see the expansion of the project both in the main upstream project and downstream projects using the plant's output as feedstock (PEC 98890075).

"In terms of fuel production, that is bigger than Secunda today, which produces 160,000 bpd, although it also produces 50,000 bpd of chemical feedstock as well," said Cox. He added that the symbolism of the Oryx ceremony represented the beginning of the gas-to-liquid world that Sasol was developing outside South Africa for the first time.

Qatar, in 2003, has been negotiating GTL project investments estimated at over $20 billion with Sasol-Chevron, ExxonMobil (NYSE:XOM) (Irving, Texas), Marathon (NYSE:MRO) (Houston, Texas) and ConocoPhillips NYSE:COP) (Houston, Texas).

Qatar's Ras Laffan 11 LNG (Liquid Natural Gas) company (PEC 98890051) and ExxonMobil to supply 15.6 million tons per year of LNG to the US which will make the country the single largest supplier of LNG to the US market.

The country also has recoverable oil reserves of 15.2 billion barrels of oil which represents 1.4% of global reserves. There are only 150,000 Qatari citizens and 500,000 expatriates living and working in the country.

A DOE presentation reports that US natural gas consumption is expected to increase by 1.8% annually in the period 2001-2025, reaching 35 tcf or 26% of US delivered energy consumption by 2025. US domestic gas production is expected to increase more slowly than consumption over the same period rising from 19.4 tcf in 2001 to 26.4 tcf in 2025.

With the likely continuing discovery of new, large onshore and offshore uncommitted gas reserves world-wide through 2010 the progress of GTL plants could be notable as the product offers blending flexibility and upgrading, environmental cleanliness, a reduction in flaring and a strategic alternative for host countries to monetize natural gas resources at a time when technology improvements are rapidly reducing production costs. Gas resources supplying GTL plants could be seen by a host country as virtual fuel and chemical wells rather than feedstock resources for the LNG export supply chain and downstream processors in other countries.