Multibillion-dollar plant for B.C. shale gas proposed
Talisman Energy and South Africa's Sasol launch feasibility study
vancouversun.com
By Gordon Hamilton, Vancouver Sun June 30, 2011
South African energy giant Sasol and Talisman Energy have launched a feasibility study into a proposed natural gas-to-liquids plant in Western Canada that could have a price tag as high as $10 billion.
The technical study, to be done by global energy engineering firm Foster Wheeler, is to determine the actual cost and the location of a plant to unlock the value of the 44 trillion cubic feet of shale gas deposits in the partners' northeastern B.C. assets, said Talisman spokeswoman Phoebe Buckland.
Talisman has already held talks with the B.C. government on the proposed plant, the B.C. energy and mines ministry confirmed Wednesday.
"It's a big project," Buckland said, "All those sorts of conversations around where is most attractive to build the plant, what makes sense from a labour force and skilled workers point of view, will be worked out through the feasibility study."
Buckland described the project as "very early days," but confirmed that work is underway on it. The plant would likely be close to the gas deposits, Buckland said. A decision on the planned facility is expected in the second half of 2012.
Besides the gas-to-liquids joint venture, the two companies are 50/50 partners in two shale gas assets in B.C.'s Montney basin near Dawson Creek. They are considering two options for the gas-to-liquids plant: a smaller one producing 48,000 barrels of fuel a day at a cost of $3 billion to $5 billion and a larger plant, producing 96,000 barrels a day for $6 billion to $10 billion.
The B.C. energy ministry has confirmed that it has held talks with Talisman on locating the facility in this province.
Energy and Mines Minister Rich Coleman was not available Wednesday to comment on the Talisman-Sasol proposal but in an email response to The Sun, a ministry spokesman said a gasto-liquids (GTL) plant would be a boon to the B.C. economy.
"To date there have been some informal conversations between B.C. and Talisman regarding a GTL facility in B.C.," the spokesman said. "B.C. is an excellent business location and a GTL facility would be of great interest because it would add value to our abundant natural gas reserves."
Sasol is a world leader in converting coal and natural gas to liquid fuels -synthetic fuels that can replace conventional fuels. The proposed plant would convert natural gas to products like naphtha, diesel and liquefied petroleum using Sasol's gas-to-liquids technology.
Sasol became involved in B.C. when it paid $1.05 billion in March for a 50-per-cent stake in Talisman Energy's Farrell Creek shale gas assets and on June 10 completed a second deal worth $1.03 billion for a 50-per-cent stake in Talisman's Cypress A gas assets. Both are in the Montney basin.
The sheer size of the shale gas reserves in B.C. requires domestic companies like Talisman to seek out joint venture partners.
Sasol was brought in to "help us to unlock the upstream value that's held in the Montney assets," Buckland said. "We are looking at an estimated 44 trillion cubic feet of net contingent resource there."
Natural gas prices have plummeted in the last few years with the development of shale gas, which is locked as tiny bubbles in shale formations. It is collected by using water pressure to fracture the shale. The gas then migrates to collection points.
Shale gas deposits are found throughout North America and have turned natural gas from a domestic resource into a global commodity. The overflowing supplies have forced prices down domestically. Prices are now hovering at $4.20 per million British thermal units, down from $13 in mid-2008. The price in Asia is significantly higher, averaging $11.60 per million BTUs in May.
Besides the Sasol-Talisman GTL proposal, there are at least three separate plans by other companies with a stake in B.C. shale gas to build liquid natural gas terminals on the West Coast to develop markets in Asian economies.
By converting natural gas into transportation fuels like diesel and jet fuel, the value of natural gas would be more inclined to track oil prices.
Gas-to-liquids technology was first developed in Germany in the 1920s and was used by the Germans during the Second World War to convert coal to synthetic fuel.
Sasol is the global leader in gas-to-liquids technology, but other energy companies are entering the field. Royal Dutch Shell just completed construction of a gas-to-liquids plant in Qatar at a cost of $19 billion.
ghamilton@vancouversun.com
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