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Gamechanger: Shell Oil proves that gas-to-liquid conversion is profitable at commercial scale

September 11, 2012

For four decades, Shell Oil has been experimenting with processes to profitably convert natural gas to various liquid fuels, including jet fuel and diesel, that are more valuable than the natural gas itself.  Twenty years ago, Shell built its first commercial gas-to-liquid plant in Malaysia.  Two years ago, using the lessons learned in Malaysia, Shell broke ground on the massive Pearl plant in Qatar.

Shell has spent nearly $20 billion on this plant – $20 billion of its own money, with no government investment – in the hopes of liquefying and profiting from Qatar’s gigantic North Field, the largest known natural gas reservoir in the world.  The North Field, with over 900 trillion cubic feet of technically recoverable gas, is 4 times larger than the next largest reservoir, in Russia.  Combined with the gas in the South Pars area (Iran’s reserve), the entire area is nearly six times larger – about 1/5th of the worlds total non-shale reserves.

Pearl made its first commercial deliveries last summer, and has slowly added production over the last year.  It will be in full operational mode from 2013 onward, and will dominate GTL production for years, perhaps decades to come:

From 2013 onward, Shell anticipates generating 260,000 barrels per day of liquids – 140,000 of jet fuel, diesel and other high quality distillates, plus 120,000 of ethane and natural gas liquids.  Shell estimates that it will earn $10 billion per year from the Pearl Plant.

The European Energy Review has a long story today on the history of Shell’s GTL efforts in general and the details of the Pearl plant in particular.  I highly recommend reading the entire thing.  Another technical breakthrough – combining horizontal drilling with hydraulic fracturing – has opened up huge amounts of natural gas for exploitation all around the world.  GTL technologies make that bounty even more versatile and will go a long way toward providing the energy needs for a growing planet for a century or more.   Energy is the single most important factor in economic growth, and finding ways to cleanly and efficiently exploit our massive bounty of fossil fuels are the surest paths to ensure that growth, now and into the future.

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