September 2, 2012
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№ 6 (June 2012)

Rosneft Launches its GTL Project

   Russia might get its very own GTL (Gas-to-Liquid) project: state-owned oil producer Rosneft plans to install a pilot production unit at one of its refineries. If successful, this will solve the issue of associated petroleum gas utilization, also helping the company to produce higher-quality motor fuel.

By Galina Starinskaya

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   Rosneft has already started working on the project; currently the company is mapping out its pilot GTL production unit on-site. The unit will be installed at the company’s Novokuibyshevsk refinery, the launch is planned for 2014. From a thousand cubic meters of methane the new installation will produce some 300-360 tons of synthetic liquid hydrocarbons; catalyst production capacity is planned at 90-135 kg/cu.m.

   There are several reasons for Rosneft to judge this as a promising direction. First, by 2020 oil production may decline, while motor fuels demand is likely to rise; this will force the producers to seek alternative sources of raw materials - and do not forget that environmental demands to fuel are getting ever tighter. Second, launching large-scale GTL production units will provide transportation of the huge energy potential to customers, at much better price. And thirdly, GTL projects solve the issue of associated petroleum gas utilization. Russian companies are yet to solve the challenge of utilizing 95% of associated petroleum gas. For Rosneft, the number is 60%. The introduction of commercial GTL processes will ensure utilizations of vast gas reserves earlier thought commercially unviable.

   Rosneft plans to implement the GTL project independently, using own proprietary developments. The company recently acquired the R&D Center with GTL technology patents and significant experience in this field.

   Rosneft keeps a tight lid on the volume of investments assuming, though, that the unit cost will be lower than that in GTL projects run by foreign partners (see the chart).

   This is the first real-life implementation of the GTL technology, though earlier Russian companies had the ideas about GTL projects, too.

   For example, in 2006 Gazprom stated its intent to build jointly with Shell a 12 billion cubic meters per year processing plant near Nadym (Yamal). At that time the investments were estimated at $8 billion. A while back, YUKOS also planned construction and commissioning of the synthetic fuel production plant in Nefteyugansk.

   GTL is the process of converting natural gas (methane) into high-quality liquid hydrocarbons. Methane could come from coal, natural gas or associated petroleum gas.

   The GTL process is divided into several stages. On the first stage syngas is produced from natural gas by combining oxygen with carbon; syngas is then converted into synthetic crude oil. This oil is considered environmentally clean; its basic characteristics make it superior to the major brands of oil as it contains by two orders of magnitude less sulfur and nitrogen, but 5-10% more of the diesel fraction. Such synthetic oil may get higher price tag (about 30%) compared to the cost of the Brent grade.

   Synoil is then processed to get higher-quality motor fuel. Traditionally about 70% of GTL-produced material is processed into diesel fuel. The second most important GTL product is naphtha, feedstock material for the petrochemical industry. The remaining products are lubricating oils and paraffines. All GTL projects use some version of the Fischer-Tropsch process – a catalyst-driven chemical reaction of converting carbon monoxide (CO) and hydrogen (H2) into fuel.

   This technology has its share of drawbacks, too: if oil price falls below $50 per barrel, the technology becomes commercially ineffective. Also, the technology prohibits staged launch of the industrial facility (as is the case with LNG plants), it runs only at full capacity.

   GTL projects will be required in the environment where gas is produced in remote areas and there is no necessary infrastructure, notes Vitaly Kryukov, analyst at IFD Capital. In such regions, it makes sense to process the gas into liquid fuel for sale at the local market. But GTL projects need cheap gas, which means the U.S. and Middle Eastern countries. In Russia, gas prices continue to edge up – at the same time, prices for oil products are being capped by the state. “It is unlikely that GTL will be used here on a large scale. It will probably be only a few percent of the total gas volume, mainly in the programs on gas utilization”, says the expert.

   The key players in the GTL market are Sasol, Royal Dutch/Shell, Exxon Mobil, BP, ChevronTexaco (see the table). Globally, volumes of gas processed by GTL technology are fairly insignificant – less than 1% of the total gas output.

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