GLOBAL NEWSWIRE SUMMARY 01/22/99
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HUGE 'GTL' DIESEL OPPORTUNITY SEEN FOR REFINERS, ELECTRIC UTILITIES, GAS CO.'S
Jan. 21, 1999 (DIESEL FUEL NEWS, Vol. 3, No. 2 via COMTEX)-- Emerging Fischer Tropsch gas-to-liquids (GTL) technologies "ultimately rank in importance with the invention of catalytic cracking by Exxon," and could revolutionize the production of super- clean GTL diesel fuel, according to a new report by New Orleans. LA- based investment banking firm Howard, Weil, Labouisse, Fredrichs, Inc.
The report, entitled "Fischer-Tropsch Technology: Gas-to- Liquids, Solids-to-Solids, Liquids-to-Liquids," is extremely bullish on the future of GTL.
Five companies-- Exxon, Shell, Sasol, Syntroleum and Rentech-- are seen as key players because they have either operated full scale plants, pilot plants and/or signed agreements, or are actively pursuing agreements to license or use their Fischer-Tropsch GTL technologies.
The report sees gasification of refinery bottoms adding significant economic improvements to refining, while helping refiners meet increasingly stringent environmental standards. Bottoms such as residual fuel today are sold for less than the cost of crude oil.
Texaco is already well ahead in gasification. To date, it has licensed its gasification/combined cycle electricity generation technology (IGCC-- which converts refinery bottoms to syngas) to over 250 facilities worldwide. Texaco also has 13 new gasifiers either in design or construction. An exclusive licensing agreement allows Texaco to use Rentech's FT technology to process syngas from any solid or liquid feedstock and to sublicense that use worldwide, offering refineries and chemical plants a complete bottoms-to-liquids package.
In one project underway, Texaco is reportedly increasing refinery throughput by 40,000 b/d using cheaper, heavy-sour crude at a 150,000 b/d facility by using a deasphaltizer unit and gasification unit to debottleneck bottoms handling.
Texaco found that additional crude throughput is offset by use of the cheaper crude. Diesel yields of 40,000 b/d and byproducts from the syngas increase revenues by $700,000 per day. This results in a two-year payback on a $500 million capital investment.
If the facility were to add a $100 million FT unit, then revenues would increase by about $250,000 per day, creating an internal rate of return of about 20%, the report found.
As to the future of FT at refineries, "we believe refiners will be forced to adopt the technology in order to stay competitive. Texaco and Rentech are uniquely positioned to take advantage," the report says.
Exxon, through a license agreement with Texaco, has the right to use the IGCC process at its refineries and chemical plants worldwide, the study notes. Exxon currently has 31 refineries and 56 chemical plants and will have many more from the pending Mobil merger.
An Arthur Andersen study for Syntroleum attempted to calculate a GTL plant's impact on earnings. "By unlocking enough stranded gas to make 100,000 barrels per day of FT products, a company of a like size to Texaco, for instance, could increase earnings per share by 26% and a price per share a like amount, assuming the company's [profit to equity] multiple remained constant.
"Further, this effect resulted only from reducing depreciation, depletion, and amortization on a per-barrel basis as the DD&A pool is spread over a larger reserve base." More benefits could result from operating the plant.
Meeting the stringent CO2 reduction requirements of the Kyoto Protocol could be another mechanism for massive FT expansion, the report finds. Applying gasification processes to coal and turning the resulting syngas into electricity and FT products is a way to help reduce greenhouse gas emissions and provide new uses for abundant coal resources, the report reasons. "We believe that 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 result." The U.S. Department of Energy and its contractor, Mitretek Systems, concur with this hypothesis.
Under this scenario, power plants could use gasification and FT to reduce emissions and produce a value-added product. So, just as refineries are getting into the power business, power plants in the future could get into the transportation fuels business.
Using Energy Information Agency data, Howard, Weil estimates that from the 1,797 billion kilowatt-hours of electricity generated in the U.S. in 1996, 460.9 million metric tons (mmt)of carbon emissions were generated. Of that, about 440 mmt came from coal. If all coal- fired generation was subject to gasification, about 95 mmt in carbon emissions could be eliminated, about 18% of the targeted reductions for 2010 under the Kyoto Protocol.
Should refineries around the world use the gasification process for refinery bottoms, another 77 mmt could be eliminated as well as other emissions like NOx, SO2 and particulates.
"Further, due to a lack of an articulated position on the specific potential environmental benefits of FT at the current time and the lack of industry interface with policy makers, little is known or appreciated by policy makers about the environmentally positive aspects of Fischer-Tropsch technology," the study observed. "However, giving the dramatic reductions that can be achieved in emissions of greenhouse gases and acid rain and other pollutants...we believe that FT's promise or 'prowess' in this respect may well be one of the primary drivers for near-term development of the technology. "However, it is up to the industry to quantify the potential benefits of Fischer-Tropsch to the environment and get that message out."-- Jack Belcher
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