GTL

Chemicals, gas-to-liquids (GTL), steel and other industries that consume large volumes of natural gas either directly or as a fuel, expecting the new era of low and stable gas prices to continue are planning tens of billions of dollars in new or expanded facilities in the U.S. But how many of those plans will become a reality? Could the much-anticipated industrial renaissance be undermined by the higher gas prices that might come with the approval of a few more LNG export terminals, new environmental regulations that spur still more gas-fired power generation, and higher natural gas exports to Mexico? Those are critically important questions to gas producers and marketers, who are struggling to figure out just how quickly—and how much—demand for gas will rise. Today we continue our exploration of industrial demand for natural gas.

The promise of vast quantities of shale gas at low and stable prices is sparking a U.S. industrial revival no one could have envisioned only a few years ago. Most of the big-dollar industrial expansion projects planned for later this decade are chemical facilities and gas-to-liquids (GTL) plants; many of the rest are steel mills and other energy-intensive industrial facilities. If all—or even most—of these projects become a reality over the next five to 10 years, gas producers in the big shale plays would benefit from sharply higher demand and  the likelihood of higher prices as well. But how many industrial projects will actually be built? Will the forecasted industrial boom turn out to be more of a boomlet?  That could happen if several factors converge, like the approval of a few more LNG export terminals, environmental regulations that result in big growth in gas fired generation, and higher natural gas exports to Mexico.  Any combination of these factors could result in significant upward pressure on domestic gas prices. In this two-part series we explore the potential for a shale-driven industrial revival.

Last week (April 9, 2013) South African firm SASOL held an investor strategy day in New York. The company confirmed it is moving ahead with plans to build a 100 Mb/d gas-to-liquids (GTL) plant in Lake Charles, LA. Shell is evaluating plans for a similar plant in LA. The plant feedstock will be up to 1 Bcf/d of dry natural gas and output will be very low sulfur diesel, naphtha and liquefied petroleum gas (LPG). A year ago in April 2012 the economics looked very positive because of the wide spread between gas prices and refined products but the margins have narrowed since then. Today we look at prospects for this plant and others like it.