Money to burn
Gas flaring is a huge environmental problem as well as a waste of resources. Now two British firms are working on a way to turn it into a source of fuel.
By Lydia Heida
Satellite images of earth show the night sky lit up by fierce fires emanating from places such as Russia and Nigeria as billions of cubic feet of gas is flared. It can equate to around 30% of the annual gas consumption in the European Union, according to figures from the World Bank.
As well as being a waste of a natural resource, flaring has long attracted the ire of environmentalists and forced regulators to impose stricter rules on the establishment of new oilfields all over the world.
That has prevented the development of 800 oilfields worldwide with gas flow rates below 50 million ft3 a day, according to research commissioned by CompactGTL.
But all this could be about to change very soon since the development of the small-scale Fischer-Tropsch reactor which turns this discharged gas into fuel while adding another source of valuable revenue.
Feeding this gas into small GTL plants could produce an estimated 73 billion barrels of oil in total. Det Norske Veritas analysed this $1 trillion-market and estimates there is room for over 10,000 small GTL plants to convert today’s wasted gas.
Dwarfed
“Even this number is dwarfed by the explosion in shale gas discoveries,” says Iain Baxter, business development director of CompactGTL.
Until now, only a handful of giant GTL plants have been commercial, at minimum capacities of 30,000 barrels per day (bpd), such as the Oryx GTL plant in Qatar and Shell’s larger Pearl facility in the same location, producing 140,000 bpd.
In the past decade, a dozen new contenders have entered the market of small-scale GTL technology, such as 1st Resource Group, GasTechno, Gas2, Synfuels, Hygear, Bio2Electric and Oberon Fuels.
Their small-scale Fischer-Tropsch reactors intensify the process over 10 times compared to conventional technology.
Leading the way, however, are British companies Velocys and CompactGTL. Their small-scale Fischer-Tropsch reactors intensify the process over 10 times compared to conventional technology.
This makes a GTL plant economically viable at around 1,000 bpd. The first projects of Velocys and CompactGTL are coming on stream.
“We have over 10 potential projects that vary in scale from 1,000 to 10,000 bpd in Australia, South East Asia, Russia, North and West Africa, United States, Canada and South America,” says Baxter. “These are at a feasibility stage, and one or two should move towards front-end engineering and design in 2014.”
Gas flaring
SBM Offshore, the market leader in floating production storage and offloading (FPSO) vessels, is working exclusively with CompactGTL on offshore projects.
This entails the integration of a small GTL plant on top of an FPSO vessel, to convert the associated gas that comes along with the natural crude into syncrude.
“Such plants will produce about 2,000 to 4,000 bpd of syncrude, which will be mixed in with the crude,” he says. To prevent gas flaring at remote offshore fields, it is otherwise necessary to either reinject the gas into the reservoir or install expensive pipelines for transport.
“Well completion costs can run over $200 million since they are located in deep water,” says Baxter. “The investment in a GTL plant on a vessel is about the same, but now the project benefits from the additional oil production.”
Brazilian oil company Petrobras paid CompactGTL $45 million for a plant: its only commercial small GTL plant until now which has been operational for over two-and-a-halfyears at Aracuja in Brazil.
Postponed
Last year, the construction of such a plant on a vessel was approved in principle by Det Norske Veritas. However, Petrobras has postponed moving offshore GTL projects into front-end engineering and design, after cutting back on upstream investments.
“We started looking at shale gas and the possibility of converting this into a higher value product such as diesel,” says Baxter. “We ran the economics in different states of North America and a 2,500 bpd GTL plant could deliver over 20% internal rate of return.”
Velocys is one step ahead of CompactGTL when it comes to profiting from the shale gas revolution in the US.
Calumet Specialty Products has selected Velocys’ FT technology for a GTL plant of about 1,400 bpd that it plans to put in the heart of the Marcellus shale, to produce paraffin hydrocarbons for food-grade waxes, cosmetics and lubricants.
‘We ran the economics in different states of North America and a 2,500 bpd GTL plant could deliver over 20% internal rate of return.’
It is likely to be the first facility to use Velocys’ FT reactors commercially. “They are proceeding with the final engineering phase,” says Jeff McDaniel, commercial director of Velocys.
Recently, Pinto Energy selected Velocys for a 2,800 bpd GTL plant based on the same concept as Calumet, although it also plans to produce fuel.
The start-up of this plant is expected in early 2016 and it is planned to be the first phase of a multi-train facility at Ashtabula, Ohio. Pinto Energy also has a portfolio of sites where it plans to develop GTL projects with Velocys’ technology.
Velocys has also been running a 6 bpd pilot plant at Petrobras’ facility in Fortaleza. This will enable Petrobras to compare CompactGTL with Velocys technology.
Biomass
Although most of their efforts are in gas-to-liquids, according to McDaniel, the company also sees opportunities in biomass-to-liquids (BTL). This differs a lot from CompactGTL. Velocys estimates that there is enough low-cost biomass worldwide to produce over 5 million bpd of liquid fuels.
Its FT reactors have been selected by Solena Fuels for GreenSky London: a facility that will turn 500,000 tonnes of municipal waste into jet fuel, diesel and naphtha.
The jet fuel will be bought by British Airways for 10 years, which comes down to $500 million at current kerosene prices. This project is going to be used as a blueprint for other biomass-tojet fuel factories under development in Rome, California, Stockholm and Berlin, in collaboration with Alitalia, American Airlines, SAS, Turkish Airlines and Lufthansa.
A few other projects are on their way: Sierra Energy chose the FT reactors of Velocys for a waste gasification demonstration plant to produce diesel that could be a step towards a larger roll out in North America. Also, Velocys has been selected by Red Rock Biofuels for a 1,100 bpd BTL facility, located in Oregon.
Patent infringement
Although the business strategy and development of CompactGTL and Velocys are different, their technology “is really close from a scientific point of view”, says Selim Stahl, analyst at DNV.
Both rely on phenomenally high heat exchange, which makes it possible to intensify the FT reaction over 10 times compared to conventional technology. CompactGTL uses two steam methane reforming (SMR) reactors and two FT reactors, which increases the total cost of a plant, according to Edison Investment Research.
However, it leads to an 80% conversion rate, whereas Velocys has a 70% per pass conversion, but this increases to 92% in recycle configuration.
Regarding CompactGTL’s technology, using two SMR reactors makes it possible to tolerate up to 35% of carbon dioxide in the feed gas. Water vapour in the FT reactor can prematurely age the catalyst, so the conversion of syngas is limited in the first one and the water vapour is condensed from the tail gas before the gas is passed into the second reactor.
CompactGTL uses metallic foils with coated catalysts that are inserted into a brazed plate-fin heat exchanger, with mini channels in the range of 5 to 10mm across. The FT catalyst is cobalt based.
‘With two contenders in the same niche, sometimes you have this type of legal battle.’
The SMR and FT reactors of Velocys contain micro channels between 1 and 10mm wide, which are closely coupled in an interwoven structure.
“One layer of process channels is alternated with a layer of cooling channels. This is repeated so there is always close contact between the area in the reactor where heat is generated and the area where heat is released,” says McDaniel. For the SMR reactor, the catalyst is coated directly onto the channel walls.
Powdered catalysts are used for the FT reactor, which are made out of cobalt crystallites combined with an organic component. “It allows us to better control the particle size and thereby get much higher activity than you can get with conventional catalysts,” explains McDaniel.
In recent years, Velocys has initiated patent infringement lawsuits against CompactGTL and its supplier. CompactGTL has not raised any patent infringement issues but has challenged Velocys’ patents.
“With two contenders in the same niche, sometimes you have this type of legal battle,” says Stahl. “It is actually a waste of time, and people should focus more on technological development than on intellectual property protection, to see how it helps to monetise gas and reduce gas flaring.”
Published: October 2013 in Professional Engineering Magazine.