Gas-to-liquids (GTL) fuels are emerging as a real and viable alternative to conventional fuels
Future fuel trends were under the spotlight in London last month as some of the big players in the emerging 'future fuels' industry exchanged views and compared notes at a specialist conference.
The World XTL12 Summit brought together leading experts in the XTL field - the collective term given to a class of technologies which convert gas, coal and biomass raw materials into liquid fuels.
The annual gathering signalled a growing momentum for, and global acceptance of, the XTL industry as a credible and viable option for resource-rich countries, including those in the Gulf, seeking to diversify their fuel sources and meet new international standards on fuel emissions at the same time.
A recent report by global intelligence service MarketResearch.com, entitled 'Gas-to-Liquids Processes for Chemicals and Energy Production', predicted that the overall XTL market was expected to be worth some $6.8 billion by 2017, from $4.6 billion this year.
The GTL market has in particular come a long way since ORYX GTL, the world's first commercially-operative GTL plant, started manufacturing low emission diesel, naphtha (a key ingredient in petrochemical production) and liquid petroleum gas more than six years ago in Qatar.
Since then, a raft of legislative and regulatory changes - including stricter emissions standards - around the world have started to alter consumer fuel demand patterns. Reflecting this, ORYX GTL has reported steadily-rising sales since its exports started in April 2007 - as of April this year it had sold about 27 million barrels of GTL diesel and about 900,000 metric tonnes of GTL naphtha, predominantly to customers in Europe and Asia respectively.
ORYX GTL's experiences are part of a wider global trend which is seeing new investment in GTL fuels. Business information provider Visiongain reports that about $5.75 billion was spent worldwide last year on new GTL infrastructure, as well as upgrades to existing plants and research and development (R&D) functions. The total market value of GTL products, meanwhile, was estimated at $1.8 billion last year, which is forecasted to rise slightly to $1.9 billion this year and $2.7 billion by 2017.
Anton Punt, ORYX GTL's lead business analyst, says the outlook for both GTL diesel and GTL naphtha are particularly promising.
"Diesel demand is forecasted to continue to increase due to better fuel efficiency, performance and lower carbon dioxide emissions," he told delegates in London. "ORYX GTL diesel delivers fuel quality beyond future stretch targets," he said.
According to respected car component and systems maker Bosch Automotive, diesel vehicles are 30 per cent more fuel efficient than petrol cars, and emit 25 per cent less carbon dioxide. The International Energy Agency (IEA), meanwhile, says diesel currently accounts for approximately 67 per cent of transport fuel in Europe, up from 47 per cent in 2000. This is a notably higher growth rate than in the US, where just 38 per cent of transport fuel currently used is diesel, a rise of only seven per cent since 2000
"The Europeans have had tax incentives favouring diesel use for many years," Punt explained. The US only introduced a series of such incentives in 2006.
"US tax credits from 2006 to 2010, along with the production of ultra-low sulphur diesel and the advent of bio-diesel, initiated an increased focus on diesel versus gasoline in the US. The US Coalition for Advanced Diesel Cars [representing automakers and some fuel suppliers] is pushing the US government to level taxes on gasoil v gasoline and thereby increase incentives for US citizens to drive on diesel," the ORYX GTL executive said.
The growth of the global petrochemicals industry is also propping up demand for naphtha, a key feedstock in the production of ethylene, itself a principal building block for a vast array of petrochemical products.
America's emergence as a potentially massive GTL fuels market is good news for gas-rich Qatar, whose government has encouraged the development of an alternative energy industry to complement its highly successful conventional fuels sector.
GTL fuels are attractive because not only are they easy to transport in liquid form, but they burn more cleanly than other fuels. This sits well with Qatar's long-term economic vision, which seeks a more 'responsible' and 'sustainable' exploitation of hydrocarbon resources.
Building a GTL industry also gives Qatar another export option should the conventional gas market falter - which some analysts and industry executives worry could happen in the longer term. There are fears that a so-called 'shale gas revolution' currently taking place in key gas consuming states like the US and China could eventually curb gas import demand, throwing international markets into turmoil. One South American gas executive recently referred to such a scenario as a "changing global energy chessboard" in which markets would be "realigned".
Qatar appears well-positioned should such fears be realised. In addition to ORYX GTL, a larger joint venture complex between Qatar Petroleum and Shell opened last November. Together, they offer substantial supply capabilities.
ORYX GTL is, Punt told the XTL summit, investigating the possibility of securing long-term GTL supply contracts with international customers, a departure from the medium-term deals to date. According to the Company, its Ras Laffan plant last year ran at 105 per cent of its approximately 32,000 barrels per day design capacity, continuing output growth trends.
Given the positive GTL market prognosis, ORYX GTL's joint venture partners, Qatar Petroleum and South Africa's Sasol Synfuels International, will have reason to feel their $1 billion initial investment is justified, and that it has been a catalyst for the rise of the world's alternative fuels industry.
"We believe our experiences in the last four to five years will set a framework for the success of GTL ventures worldwide, and have furthered ORYX GTL's position as a technology leader," Punt said.
As a nation, Qatar's environmental and sustainable development credentials will come under renewed scrutiny later this year when Doha hosts the 18th Conferences of the Parties (COP 18) of the UN Convention of Climate Change. With companies like ORYX GTL and Pearl GTL in its stable, it should feel confident of its current position.
© The Gulf 2012
