Converting inexpensive natural gas into high-value economics

By Sanjiv Save | September 9, 2020

As the world pursues decarbonization, and as a result achieving a steady state of using minimum to no fuel, a massive transition is required. During this transition, it’s imperative that whatever fuels we must use be as clean as possible in order to minimize negative climate impacts. To this end, it’s projected that over the next twenty years, global natural gas production will see dramatic growth. In today’s market, pricing for the energy commodity is well below the $2 per MMBtu mark—a mere 20 percent of what it’s worth on an energy equivalent basis when compared to oil. Within this valuation lies a great opportunity to take advantage of a high-energy value product with a low cost of supply.

But how do we unlock this valuable energy resource when a lack of international market access and the classic “curse of resource-rich nations: are both pointing to depressed prices for the foreseeable future, with very little upside projected?

Technology as an enabler will drive the change that’s required to overcome current barriers in the production of high-value products from natural gas. Take for example the following scenario: imagine if we could convert the value of natural gas to liquid fuel or chemical equivalent value, or if we could produce liquid fuels from natural gas with superior properties well beyond current norms for sulphur content, aromatics, particulate matter, and nitrogen oxides content. These products could then fetch a premium price in the market and if used as a blend stock for existing refineries, could enable these facilities to more readily meet new fuel standards without sacrificing yield and incurring additional capital cost. We could also enhance the oil sands industry by leveraging our natural gas assets, by exploiting synergies in steam production, fuel pool quality, and shared infrastructure, and by enabling more carbon capture, utilization, and storage (CCUS) technologies.

The oil and gas industry is most likely to move in a direction that’s been proven and as such, the first transition and one of the most promising pathways to adding value to this natural resource is to chemically convert natural gas into higher value and cleaner liquid products through Fischer-Tropsch (FT) technology or produce fuels from natural gas (i.e., LNG) by converting to methanol.

With FT technology, natural gas is converted into a syngas comprised of hydrogen and carbon monoxide which is then fed to an FT reactor where it’s converted to a synthetic liquid hydrocarbon product. The liquid hydrocarbon product is further converted to premium diesel and naphtha through mild hydroprocessing. The diesel is virtually free of sulphur, aromatics, and nitrogen and can be sold into the fuels market, while the naphtha can be sold to oil sands operators as diluent. Diesel that’s synthesized in this way also exceeds IMO’s sulphur limit for ships’ fuel oil standards (IMO 2020) and could therefore be even more valuable as a blending feedstock for refineries, producing a higher quality and higher value IMO 2020-compliant fuel.

Methanol can similarly be produced from hydrogen and carbon monoxide that can be further converted to gasoline through the methanol to gasoline (MTG) process. The gasoline produced is virtually free of sulphur.

As technology evolves, new processes continue to be discovered while proven processes are being improved. Notably, experts are working to convert natural gases to syngas using renewable power to produce syngas followed by FT. The end-product is a green liquid fuel.

These pathways all have one thing in common: they illustrate how we can add value to an abundant and cost-competitive natural resource while allowing for the production of cleaner liquid fuels and chemicals. Now’s the time to start reconsidering how we better utilize this valuable energy resource and, in the process, advance the oil and gas industry to higher, cleaner standards.