SPE MS. Gas to Liquids: Beyond Fischer Tropsch Philip E. Lewis, SPE, ZEEP Ltd. Abstract

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1 SPE MS Gas to Liquids: Beyond Fischer Tropsch Philip E. Lewis, SPE, ZEEP Ltd. Copyright 013, Society of Petroleum Engineers This paper was prepared for presentation at the SPE Asia Pacific Oil & Gas Conference and Exhibition held in Jakarta, Indonesia, 4 October 013. This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents of the paper have not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessarily reflect any position of the Society of Petroleum Engineers, its officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written consent of the Society of Petroleum Engineers is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; illustrations may not be copied. The abstract must contain conspicuous acknowledgment of SPE copyright. Abstract The oil and gas industry has long sought ways of converting difficult to transport natural gas into easily transported liquids, especially from remote locations where local opportunities to market natural gas are limited. In recent years, interest in Gas To Liquids (GTL) has expanded beyond such stranded gas because of a widening spread between the market value of natural gas and hydrocarbon liquids even in locations with mature natural gas markets such as the USA. The Fischer Tropsch (FT) process is a well-known and established method of producing hydrocarbon liquids from natural gas; for some, it has become synonymous with GTL. This paper points out that commercial and near commercial alternatives to the FT process exist and may be commercially superior in some settings. The focus is on technologies that have been successfully piloted. Available alternatives to FT are primarily natural gas to methanol and methanol derivatives. Methanol synthesis is one of the most mature industrial processes and methanol annual production volume ranks among the top three products in the petrochemical industry. Traditionally, methanol has been primarily a precursor to formaldehyde and acetic acid. In recent years, methanol has achieved added importance as an precursor to olefins and motor fuels, including direct blending into the gasoline pool, and also as a precursor to many motor fuel products such as gasoline and MTBE, a gasoline additive still very important outside the U.S., and DME, a diesel fuel substitute. An Overview of the Fischer Tropsch Process Franz Fischer and Hans Tropsch filed their first patents in 196, with their first U.S. patent granted in The FT process was a well known component of Germany s World War II effort, providing 9% of its motor fuel and 5% of its automotive fuel from coal feedstock. In the FT process, synthetic, waxy crude is produced from syngas which may be produced from any carbonaceous substance (typically coal). Syngas is a mixture of carbon monoxide and hydrogen, via partial oxidation of carbon present in the coal: C H O Heat H (1) Alternatively, syngas may be produced from natural gas, which will be discussed later. From syngas, the FT process produces a spectrum of hydrocarbons: ( n 1) H nco C H nh O () n (n ) C n H (n+1) is the formula for alkanes, or saturated hydrocarbons, which in the case of FT, tend to be normal, or straight-chain isomers. The mean value of n is determined by catalyst, process conditions, and residence time, which are usually selected to maximize formation of alkanes in the range C 5 -C 1. The lighter fraction, C 5 -C 1, is separated as naphtha, which may be further refined into gasoline (which typically contains aromatic and branched hydrocarbon fractions). The heavier fraction, C 8 -C 1, being straight-chain hydrocarbons, is suitable for direct blending into the diesel fuel pool. Heavier alkanes (waxes) may also be formed but are usually undesirable. One inescapable fact of FT chemistry is that more water will be produced than hydrocarbons (by mass). This produced water must be considered an undesirable sink for expensive and valuable hydrogen and also an unwanted waste stream.

2 SPE MS The naphtha fraction is not generally marketable and must be shipped to a refinery for further processing into gasoline blending stock. This explains why nearly all commercial FT plants, both those actually built and those proposed, have been associated with large refinery complexes. Recent efforts to improve the desirability of the FT process (commercially speaking) have focused on increasing selectivity for the diesel fraction and minimizing the naphtha fraction. With certain modification and modest post-processing, modern FT processes typically claim selectivity for diesel fraction of 75%, naphtha, 0%, and LPG is the remaining 5%. Until relatively recently, FT s commercial history was limited to Germany in World War II and South Africa s Sasol plants, situations were economics were subordinated to national security concerns in regions where coal was plentiful but oil and natural gas were scarce. National security concerns also dictated that the refining complex would be made available to facilitate large scale implementation of FT. These conditions do not generally apply to commercial, profit-seeking organizations. However, it has long been recognized that syngas, the precursor to the FT reaction, may be more economically produced from natural gas even when it is more expensive than coal, petroleum coke, or biomass on an energy content basis. Natural gas sourced syngas typically has greater reliability, less required syngas cleanup and much lower capital costs. Syngas production is in fact the single biggest cost component for the FT process, and probably for all GTL processes. In 1993, the first commercial scale natural gas fed FT plant started up, Shell s MDS plant in Malaysia, producing 34,000 bbl/d of middle distillates and waxes which were further refined into marketable products. This plant was built in part to exploit inexpensive stranded natural gas that had limited conventional markets. Shell has since built and started the very large scale Pearl GTL plant in Qatar, producing 140,000 bbl/d of hydrocarbon liquids at a reported capital cost of approximately USD 18 billion. FT plants show a pattern of very large scale and associated large refining complexes to monetize the spectrum of products produced by the FT process. Two very large scale natural gas fed FT plants have been announced to take advantage of the recently plentiful and relatively low cost natural gas in North America. Sasol has announced a plant in Louisiana and Alberta, each with multiphase construction and with supporting refining complexes. Shell has also mentioned a very large scale Louisiana or Texas FT plant, but no details have been forthcoming. These plants follow the pattern of previous FT plants of very large scale integrated with a refining complex (Collings, 00). Table 1 Fischer Tropsch Commercial Scale Plants in Operation or Announced Operator / Plant / Location Capacity, boe/d Feedstock Year started (expected) Sasol / Sasol I / Sasolburg, S. Africa 15,000 Coal 1955 / 1966 / 1975 Sasol / Sasol II / Secunda, S. Africa 55,000 Coal 1980 Sasol / Sasol III / Secunda, S. Africa 55,000 Coal 1983 Shell / MDS / Bintulu, Malaysia 1,000 NG 1993 Sasol / Oryx / Qatar 34,000 NG 007 Shell / Pearl GTL / Qatar 140,000 NG 011 Sasol / / Louisiana, USA 96,000 NG (018) Sasol / / Alberta, Canada 96,000 NG (00) Despite its long and successful history, there has never been, nor is there on the horizon, an example of an FT facility exploiting stranded natural gas at a remote location, nor of an independent gas producer (i.e., not integrated with a refining complex) monetizing gas via the FT process. Natural Gas to Methanol Methanol synthesis also enjoys a long history, actually preceding the FT process. In 193, BASF first synthesized methanol on an industrial scale, also from coal-produced syngas. In the 1960s, the process was greatly improved by new ICI (now Johnson Matthey) catalysts that operated under much lower pressures. That process has been further improved through evolutionary development of many applications. The methanol synthesis reaction from syngas is CO CH OH H 3 (3) Note that there are no byproducts from the methanol synthesis reaction. It is true that other reactions will also take place in a methanol synthesis reactor, but with the proper maintained process conditions, the catalyst is highly selective and syngas

3 SPE MS 3 conversion to methanol typically approaches 99%. This makes methanol synthesis one of the most efficient and selective processes in the industrial repertoire. To better understand GTL commercial issues, it is necessary to consider the first step which is common to all GTL processes: syngas generation. Syngas Generation As previously mentioned, syngas creation is the first step in both FT and methanol synthesis. Syngas may be created from a solid carbonaceous material in a gasifier, or from natural gas in a reformer. The two most common types of reformer are the steam methane reformer (SMR), and the auto thermal reformer (ATR). Each has their advantages, and in fact they are often used together in complementary fashion. Their dominant reactions are: SMR: ATR: CH H O Heat H CH4 O 3H 3CO H O 4 3 (4) (5) Note that the SMR requires addition of steam, where the ATR requires addition of oxygen (CO.and heat are provided by partial combustion, hence the name auto thermal ). Generally, raising steam is much less capital and operationally intensive than producing oxygen, especially at smaller scales. Further, steam is generally available from waste heat recovery of methanol synthesis. As equation (1) shows, the desired syngas ratio (i.e., H :CO) for methanol synthesis is. SMR and ATR produce syngas ratios of 3 and 1, respectively. By combining an SMR and an ATR in parallel, a range of syngas ratios may be produced at will. This is referred to as combined reforming or two-step reforming (Cheng, 1994). In addition to providing control over syngas ratio, combined reforming takes advantage of the fact that while an SMR may be more economical at smaller scale, its cost and complexity tends to scale up rather linearly, putting a practical limit on SMR size. ATR cost and complexity scales up more in accordance with typical scaling exponents (say, 0.7) which gives substantial economies of scale. Combination with an ATR allows more optimal sizing of both units and allow the overall plant to exploit major economies of scale. It is necessary to understand the differences between these plant configurations, especially SMR only compared to SMR + ATR, because the infrastructures required to support them are quite different. Unless an oxygen pipeline is nearby, it would be greatly preferable to avoid the expense and complexity of producing oxygen as required by an ATR. Cryogenic oxygen plants are well suited to very large scales only, and they consume large amounts of electric power. Although non-cryogenic oxygen plants may offer an alternative for smaller scale remote plants in the near future, for now, methanol plants (or other syngas consumers such as FT) using an ATR are not as well suited to smaller scales or remote locations as SMR only plants. SMR only methanol plants have several options to address their non-optimum syngas ratio: 1) use the excess hydrogen for its energy content, i.e., burn it, ) use the excess hydrogen to co-produce ammonia or ammonia products, 3) provide process hydrogen to another facility, or 4) add CO to the natural gas feed, which will convert excess hydrogen to carbon monoxide through the reverse water shift reaction, providing the correct syngas ratio: CO H HO (6) Option 1 is not very desirable as hydrogen has higher value as feedstock than as an energy source. Option requires a more complex and capital intensive facility and a market for ammonia (which is not easily transportable as methanol). Option 3 requires that the plant be co-located with another hydrogen-consuming facility. Option 4 provides a superior option where CO is available or may be generated. As a carbon source, CO is potentially lower cost than even low priced natural gas, and can substantially enhance methanol production economics. Several SMR only methanol plants operate with CO addition including the MHTL s M5000 plant in Trinidad and GPIC s plant in Bahrain. The M5000 plant uses CO from nearby ammonia plants. GPIC s plant initially used CO from a co-located ammonia / urea plant, but that CO source was lost in 1998 as a result of debottlenecking. GPIC therefore commissioned a project to recover CO from SMR flue gas (completed 009) to improve overall process efficiency. The Methanol Plant Population In contrast to the handful of commercial scale FT proposed and operational facilities in operation, there are over four hundred methanol plants in operation around the world. This includes roughly 300 plants in China, many of which are coal-fed and/or sporadically operated. With a few exceptions, methanol plants outside of China are natural gas fed. Therefore, further

4 4 SPE MS analysis is focused on non-chinese methanol plants. Excluding China, average methanol plant capacity is slightly over 10,000 bbl/d methanol, or about 5,000 bbl/d oil energy equivalent N. America S. America Asia Pacific ex China Europe Africa Middle East Figure 1. Active methanol plants by region Commercial methanol plants are generally about an order of magnitude smaller in scale than commercial FT plants. Further, methanol plant size has a wider, more diverse distribution with the smallest (though still commercial) plants being only approximately 1/30 the scale of the largest methanol plants, whereas FT commercial plant sizes vary only by about a factor of 10. This much smaller and more diverse scale makes gas to methanol a more widely applicable and accessible method of natural gas conversion. Put another way, successfully operating methanol plants come in all shapes and sizes: small and large; coal and gas fed; SMR, ATR, and combined reforming; remote and integrated. The few modern successfully operated FT plants tend to come in one flavor: very large and very integrated. The Methanol Market Methanol is one of the highest volume and fastest growing petrochemical products, however, its market still much smaller than the conventional motor fuel market that FT products service (EIA, 013). Further, traditional applications of methanol can be expected to grow only at about the same rate as GDP growth. Nevertheless, new methanol applications are creating very robust growth and strong pricing. In China particularly, methanol is being directly blended into the gasoline pool and is used as the precursor for very high value products such as olefins. These new and rapidly growing applications are producing very rapid growth rates in methanol demand. Table Global Methanol and Liquid Fuels Consumption Growth Worldwide Growth Year Methanol Liquid Fuels 008 % -1.6% 009 5% 0.3% 010 9% 45% 3.1% 3.6% % 1.4% 01 10% 0.4% Methanol consumption grew strongly even in the deep recession years of 008 and 009. This is very unusual for a petrochemical, and supports the contention that methanol is now more than a petrochemical, or at least one that is finding new applications. Some methanol forecasters predict sustained high growth rates in the near future. Many methanol plants will need to be built over the next decade.

5 SPE MS 5 Methanol and Methanol Derivatives as Motor Fuels Methanol to gasoline ExxonMobil s very successful demonstration of its Methanol to Gasoline (MTG) technology in New Zealand during the 1990s has been a powerful draw for project developers. A number of natural gas to methanol to gasoline plants have been announced in the U.S. that intend to use this proven technology. Some announced MTG projects have not specified their technology; Haldor Topsøe does provide an alternative MTG technology. Methanol to dimethyl ether Dimethyl ether (DME) may be produced very efficiently from methanol. DME has been found to be an effective fuel for compression ignited internal combustion engines (i.e., diesel engines). At current natural gas prices, DME may provide significant cost and environmental advantages over conventional diesel fuel. Volvo has announced a global initiative toward providing heavy duty trucks that run on DME. Other heavy duty truck manufacturers have also expressed interest. DME is also an attractive substitute for Liquefied Petroleum Gas (LPG) in its applications as a space heating or cooking fuel. Direct gasoline blending Many European countries allow direct blending of methanol into the gasoline pool and are also considering commercial application of GEM (gasoline-ethanol-methanol) motor fuels. This is particularly promising because ethanol and methanol together have synergistic benefits as a gasoline blend stock. Methanol to ethanol The Celanese TCX process produces ethanol from methanol and has been successfully piloted. Ethanol is in high demand as a gasoline blend stock, especially in the U.S. where bioethanol production has flattened out in recent years. The first commercial scale plant is under construction. Direct Natural Gas to Ethanol Coskata has successfully piloted a technology to convert syngas directly into ethanol via a fermentation route using proprietary microorganisms. Fermentation takes place at much lower temperatures and pressures compared to methanol synthesis, potentially providing large savings in capital and operating expense. Conclusions The Fischer Tropsch process has very successfully converted natural gas to liquid fuels in large commercial applications. However, thus far its commercial applications have been limited to very large scale facilities integrated with refining complexes. Natural gas to methanol provides a worthy GTL alternative which may be more widely applicable in terms of scale and standalone applications. Acknowledgements The author wishes to expect his appreciation to ZEEP Ltd. for permission to publish this paper. SI Metric Conversion Factors bbl E 01 = m 3 References Cheng, Wu-Hsun; Kung, Harold H. Kung (editors): Methanol Production and Its Use, New York, New York, Marcel Dekker, Inc., Collings, John: Mind Over Matter: The Sasol Story: a Half-century of Technological Innovation, Sasol, 00. Energy Information Administration, Short Term Energy Outlook, 013.