'My summary of and comments on the Howard Weil (HW) report '
'To: +Starduster (12267 )
From: +Howard Williams
Friday, Dec 25 1998 6:49PM ET
Reply # of 12269
From Dooper on Raging Bull.
>>>By: Dooper55
Reply To: None Friday, 25 Dec 1998 at 6:38 PM EST
Post # of 3031
My summary of and comments on the Howard Weil (HW) report including some added
info from previous/other material. And it's less than 1/10 as long as the HW report. :-)
An observation: The report took a lot of work by professionals and RNTK went a BIG
extra mile to get it to us online and point others to it via a PR. Other companies with
important coverage in it have not been as aggressive nor as helpful to us as RNTK.
What I'm trying to put here is a combination of new information, to me anyway, and key
points from the report, whether new or not. I don't intend to get into the technical
bowels of F-T, except where I see really important stuff.
- HW has high expectations for F-T: "..potential to profoundly affect the oil and gas
business as well as the world we live in"......."ultimately rank in importance with the
invention of catalytic cracking by Exxon"
............Buried deep in the report is the gist of a comment made to HW by a senior
executive at a major oil company.........."the single greatest threat that the Saudis see
with respect to the primacy of oil is gas-to-liquids."
- World energy use will grow over 50% by 2015
- The world's fossil fuel reserves are huge and extraction costs will continue to drop.
- F-T products can be consumed at lower cost than conventional fuels if pollution costs
are factored in.
- Exxon, Royal Dutch/Shell and SASOL have made big investments in F-T R&D but
apparently won't license their technology to others, leaving SYNM and RNTK as the
places for others to shop for F-T licenses.
- Several oil companies have non-exclusive licenses from SYNM or have joint
development agreements to use SYNM's F-T technology, but not a right to sublicense.
[This appears to be totally devoted to natural gas GTL]
- TX has an exclusive (except for India) license from RNTK to use RNTK's F-T to
process syngas from any solid or liquid feedstock and to sublicense that use worldwide.
They also have a non-exclusive license to use RNTK's F-T to process gasified natural
gas.
- TX is the world's leading licensor of gasifiers that produce syngas that can be F-T'd.
Over 100 gasifier projects worldwide already and licenses for 250. And.......from HW:
............"It should be noted that Exxon has a license agreement for the use of the Texaco
Gasification Process. Under the terms of this agreement, Texaco has granted Exxon the
right to use the Texaco process throughout Exxon's refineries and chemical plants
worldwide. (As of the end of 1997, Exxon owned all or part of 31 refineries and 56
chemical plants --- not to mention Mobil's portfolio.)"......."The rationale of Texaco's
licensing the Rentech Technology is that an FT unit using Rentech's Technology can be
integrated into Texaco's gasifiers and use the synthesis gas made by the gasifier in order
to make F-T products."
- The report goes into detail about refineries being the best place to put F-T units
now........infrastructure's there, minimizing capital costs........produce/blend F-T diesel in
one spot......improve refinery efficiency [profits] via F-Ting gasified bottoms from
increasingly-heavy crude. And..........use F-T as a "load leveler" that lets a refiner
produce electricity during high demand (and sales price) hours and F-T products during
low electrical demand hours. The gasificaion/F-T unit just sits there, processing a
constant feedstock flow and maximizing revenue.
- and a quote from a TX article: "Preliminary reviews indicate a good rate of return on
incorporating this [FT] technology, even when done as a retrofit design."
.............[So, as of October 8, 1998, RNTK is tied to TX, the world's leading gasifier
company (that also licenses to Exxon) for the best current use for F-T. Read that until
you fully understand it and its importance.]
- According to HW, RNTK holds nine F-T patents "including several key patents and
patent applications that relate to processes for enhancing the overall yield of F-T
products." [Is it important that HW didn't restrict that to iron-catalyzed (RNTK and
SASOL) F-T products? BTW, I don't know the answer to that, I just found it
tantalizing.]
- NUMBERS HERE........TX is debottlenecking bottoms handling at a 150,000 bpd
refinery, letting them run lower quality crude more profitably by adding a deasphalter
and a gasifier. Two year payback of $500M capital cost. Doesn't include RNTK F-T
[yet....]. HW analysis, that assumes the environmentally superior F-T products fetch a
$5/b premium, concludes:
........."At these levels, assuming an FT unit was added to the IGCC unit in [that]
refinery....at an incremental cost for the FT unit of around $100 million, revenues would
increase some $250,000 per day. We estimate an internal rate of return of around 20%
on such a project." [Not too bad.....]
- Refiners have spent billions on the bottoms plague and will spend billions more. HW
says, "We expect some of those billions in the future to be spent on IGCC/FT plants."
[IGCC/FT = TX/RNTK.]
- Coal, as currently used, is a bad carbon polluter per energy content. HW says,
"However, by utilizing a gasification technology like Texaco's and a FT technology like
Rentech's, drastic reductions in carbon emissions can be realized." "We believe over
time gasifying coal and producing both electricity and FT products therefrom has the
potential to become a huge global business due to the very substantial reduction of
carbon and other emissions that results."
- If all the current and planned U.S. coal fired power plants implemented IGCC, it
would achieve 18% of the U.S.'s Kyoto target for carbon emissions by 2010. [That's a
big slice. Then consider adding RNTK FT to all of that.......]
- Separate from that, bottoms constitute 10% to 20% of current world refinery output.
Running those through an IGCC/FT unit can produce electricity and FT products (7 to
15 million bpd) and reduce carbon emissions by 39 to 77 million metric tons per
year.......and reduce nitrogen oxide, sulfur dioxide and particulates at the same time.
- On natural gas (NG), the world has proven reserves of about 5 trillion cubic feet,
about half of which is "stranded", i.e., it has no local market. That "stranded" gas could
make about 250 million barrels of F-T synfuels.....close to Saudi Arabia's reserves.
Alaska's North Slope has enough NG to make 480,000 bpd for 20 years.
- "As to LNG vs GTL, two noted investment firms have made economic comparisons
and both have concluded that investment returns on both technologies are roughly
comparable." Further, many NG fields around the world are not large enough to support
an LNG infrastructure. Some of those may go the pipeline route, others GTL.
- LNG is a distribution system, GTL is a production system. "In this respect, LNG is no
competition."
- Applicable to both SYNM and RNTK: Oil refineries cost $12,000-$14,000 per daily
barrel. "If FT technology breaks through to this level, "natural gas refineries," will
become compelling alternatives for producing refined products"....even more so, or at
higher $/bpd, when environmental benefits are factored in.
SYNM and RNTK..........data from HW report [except where noted]:
SYNM:
- 7 agreements with various large oil companies, mostly non-exclusive licenses to use
SYNM F-T process, mostly [all?] aimed at NG.
- 3 announced GTL plants: 1) Sweetwater, Wyoming 8,000 bpd plant, start
construction 1999, start operations in 2001. 2) "Joint Venture" plant with TX and
Brown & Root, 2,500 bpd, possibly barge-mounted GTL plant [schedule not given]. 3)
With ARCO at Bellingham, Washington, a 70 bpd pilot plant to demonstrate a SYNM
slurry reactor, expect operations start in 1Q99, ARCO is a big holder of North Slope
NG........SYNM and ARCO are studying a 200,000 bpd GTL plant for the North
Slope.
- Chrysler/SYNM signed an agreement in October 1998 "to develop designer fuels
derived from natural gas that will be sulfur-free, affordable and potentially cleaner than
any transportation fuels currently available."
- Royal Dutch/Shell Group owns 1.5% of SYNM, Marathon owns 1% of SYNM.
- There's a full page devoted to a discussion of Exxon's efforts to protect its patent
rights to its cobalt catalyst used in a slurry reactor. It is not known if this will have any
effect on SYNM. "Syntroleum and its licensees do not believe they have or will infringe
on any one's patents." HW simply thinks investors should be aware of this without
passing judgment and says if Exxon took SYNM to court, they might have all of
SYNM's formidable licensees to deal with too.
- Several studies have questioned the cost savings attributable to the SYNM
air-rather-than-oxygen approach, but SYNM's success in licensing its technology may
indicate the doubters are wrong.
- Summary-ish for SYNM by HW: "Syntroleum clearly has broadly licensed its
technology and further, is keen to develop its own "natural gas refineries" for specialty
products.
RNTK:
- Built and operated (1992-1993) with Public Service Company of Colorado a 235
bpd GTL plant on a Pueblo, Colorado landfill. The landfill produced too little gas so
RNTK ran the plant on NG and proved its performance and technology. This plant,
conveyed to RNTK, has been sold to Donyi Polo Petrochemicals in India where it will
be enlarged and used to produce 300+ bpd of high-value GTL waxes using flared NG
in about a year.
- In the early 1990's RNTK had laboratories in California and Colorado and
vehicle/engine companies test their F-T diesel fuel with excellent, documented emission
reduction results. "It is expected that all FT diesel will perform similarly."
- in October 1998, RNTK granted Texaco "(1) an exclusive license to use for its own
account, and sub-license, Rentech's FT technology with non-gaseous feedstocks and
(2) a non-exclusive license to use for its own account, Rentech's FT technology with
gaseous feedstocks." [The TX exclusive license does not cover India where Donyi Polo
has an exclusive.]
- "Texaco has entered into a worldwide agreement with Exxon for Texaco's gasifier
technology and currently is engineering units in three of Exxon's biggest refineries on
three different continents with interesting potential for retrofitting an FT unit."
- From RNTK: RNTK is in ongoing discussions with about 5-6 organizations regarding
non-exclusive licensing of RNTK's F-T technolgy for natural gas GTL.
- RNTK has a joint development agreement with Thermal Conversion Corp. (TCC) to
examine using TCC's plasma technology to produce syngas from NG, tailored to
RNTK's F-T process. Successful computer modeling is complete and the companies
will soon (1Q99) physically test the combined process. If successful, it will eliminate the
need for an oxygen plant and CO2 removal for RNTK F-T. It appears to be suited for
small F-T plants only. [Also, if successful as an F-T syngas generator, if TCC licenses
its "plasma reforming" process to other F-T companies, RNTK will get some royalties
or fees, the amount being totally unknown to me.]
Summary-ish for RNTK by HW: "Rentech has hitched its star to the Texaco "star" in
the solids and liquids side of the FT business and while it may take equity interests in
GTL plants, is more interested in gas-to-liquids licensing agreements."
.......and, finally, my favorite excerpts (from many well-qualified candidates):
- Speaking in general regarding F-T in a refinery setting, HW says, "It should be noted
that the economics of these projects are largely unaffected by world oil prices."
...........Further......."..we believe refiners will be forced to adopt the [FT] technology in
order to stay competitive. Obviously, Texaco and Rentech are uniquely positioned to
take advantage of this fact."
Merry Christmas to all, again, and Happy 1999!
Doop III<<<
Enjoy,
H.W.
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