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Success Factors for the Commercialisation of Gas-To- Liquids Technology

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Success Factors for the Commercialisation of Gas-To- Liquids Technology A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Meleloe, K. E.; Walwyn, D. R. Article Success factors for the commercialisation of Gas-to- Liquids technology South African Journal of Business Management Provided in Cooperation with: University of Stellenbosch Business School (USB), Bellville, South Africa Suggested Citation: Meleloe, K. E.; Walwyn, D. R. (2016) : Success factors for the commercialisation of Gas-to-Liquids technology, South African Journal of Business Management, ISSN 2078-5976, African Online Scientific Information Systems (AOSIS), Cape Town, Vol. 47, Iss. 3, pp. 63-72, http://dx.doi.org/10.4102/sajbm.v47i3.69 This Version is available at: http://hdl.handle.net/10419/218617 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ www.econstor.eu S.Afr.J.Bus.Manage.2016,47(3) 63 Success factors for the commercialisation of Gas-to-Liquids technology K.E. Meleloea and D.R. Walwynb * aPetroSA (Pty) Ltd bDepartment of Engineering and Technology Management, University of Pretoria, Private Bag X20, Hatfield, Pretoria 0028, South Africa *To whom all correspondence should be addressed [email protected] Notwithstanding the 2014/15 plunge in crude oil prices, Gas-to-Liquids (GTL) technology has been acclaimed as an important alternative to existing sources of liquid fuels, leading to significant efforts by many oil and gas companies, including Sasol, Shell, Axens, BP, GTL.F1, JOGMEC and Rentech, to develop GTL processes. However, only two companies, namely Sasol and Shell, have been successful with these endeavours. In this research, a mixed methods approach has been used to explore the reasons for this success, including the influence of commercial and technical factors. A framework consisting of five commercialisation success factors was developed and an analytical hierarchy process used to compare and rank the different success factors following interviews with a diverse set of role players in the GTL industry. It is clear that large-scale GTL projects require massive capital investment and carry large techno-economic risks. Moreover, an accurate return on investment is impossible to predict due to uncertainties in technology performance and market factors. As a consequence, project developers and financiers mitigate their risk by securing co-investment from GTL operators. Shell and Sasol dominate the GTL industry not necessarily because their technologies offer higher returns, but because they have jointly invested in GTL projects, an approach which subscribes to a model of technology push with risk sharing. It is recommended that other licensors should pursue the large scale validation of their technology at an existing syngas facility as a strategy to gain entry into the GTL market. Introduction reduced or depressed gas prices due to increased shale gas discoveries in the United States (US) and hence During the last three decades, several Gas-to-Liquids (GTL) lower gas prices; although this observation seems to be projects have been developed as attractive alternatives for predominantly applicable to the US, its impact could natural gas owners to monetise their gas and thereby diversify soon be felt in other parts of the world leading gas owners their energy mix (Wood et al., 2012). GTL processes produce and fuel industry developers to consider other gas a variety of high-quality liquid fuels, including diesel with a monetization options high cetane number and low diesel content, and jet fuel stricter environmental regulations through tighter fuel (Wood, 2005). specifications which make GTL fuel attractive because of its excellent quality (Sajjad et al., 2014) The first wave of GTL developments in Qatar was as a result the need to develop additional energy resources and of the abundant supply of economically-priced stranded gas. diversify fuel supply (Ghaemmaghami, 2001; Rahmin, The natural gas to oil price differential that has persisted in 2005). North America, driven by increased shale gas production, has also sparked renewed interest in developing GTL projects. At The main conversion process in all the recent GTL project low natural gas prices (i.e. <US$ 4/MMBTU) and high crude developments is Fischer Tropsch (FT) synthesis, and it oil prices (>US$ 75/barrel), a good commercial case can be dominates both large and small-scale projects targeting made for GTL technologies (Wood et al., 2012). Although middle distillate liquid transportation fuel markets or crude oil prices are currently well below their 2014 levels, speciality chemicals such as wax, lubes and paraffinic global interest in GTL is likely to increase for a number of solvent. There have been numerous FT technology reasons including: development activities in the last three decades, all of which have been aimed at the monetization of stranded gas resources using GTL processes. A list of FT technology licensors is shown in Table 1. 64 S.Afr.J.Bus.Manage.2016,47(3) Table 1: Overview of the FT synthesis licensors Licensors Reactor Type Test unit capacity Location ConocoPhillips Slurry phase 400 bpd Oklahoma, USA ExxonMobil Slurry phase 200 bpd Louisiana, USA Eni/IFP/Axens Slurry phase 20 bpd Sannazzaro, Italy Syntroleum Slurry phase 100 bpd Oklahoma, USA JOGMEC Slurry phase 500 bpd Yufutsu, Japan GTL.F1 Slurry phase 1000 bpd Mossel Bay, RSA BP / Davy Fixed bed 300 bpd Alaska, USA Rentech Slurry phase 10 bpd California, USA Shell Fixed Bed 3 bpd Amsterdam, Netherland Sasol Slurry phase 400 bpd Sasolburg, South Africa Source: Godorr (2011), Steynberg and Dry (2004), Steynberg (2004), Velasco et al. (2010) All the existing GTL facilities and projects under these options, gas composition might have to be adjusted to construction presently use or are designed to use Sasol or the required composition for FT synthesis. Shell technology, despite other licensors having larger technology demonstration units or pilot plants than either The FT-based GTL process consists of three main steps as Sasol or Shell. It is apparent that the competing FT shown in Figure 1. In the first step, natural gas is reformed technology licensors, other than Shell and Sasol, have to produce synthesis gas (syngas), the latter being a mixture struggled to enter the GTL markets. In this study, the reasons of carbon monoxide (CO) and hydrogen (H2). The second for this failure, and particularly whether this has been a direct step involves FT synthesis, which converts syngas to consequence of their commercialisation strategy, have been synthetic products. In the final step, the FT products are explored. A mixed methods approach has been followed to upgraded using cracking and hydro-processing units to yield identify the key commercialisation success factors, and to products that meet the required market specifications (Bao et determine how influential these factors have been in the al., 2010). success or failure of the various licensors. Overview of GTL and commercialisation GTL technologies GTL involves the chemical conversion of natural gas into a synthetic mixture, which can then be upgraded and separated into useful hydrocarbon fractions including liquid transportation fuels. The technology can also be used to convert other abundant natural resources such as coal and biomass to fuels and value added chemicals, these processes Figure 1: Overview of the GTL process being referred to as coal-to-liquid (CTL) and biomass-to- liquid (BTL) respectively. Source: Adapted from Djakovic (2011) The GTL process was first discovered by the two renowned GTL can address a number of important issues and challenges German professors, Fischer and Tropsch, in the 1920s. Their in the oil and gas industry including the economic use of process, known as the FT process, was used by Germany remote gas, the impact of stricter environmental regulations, during World War II and by South Africa from the 1950’s, especially through tighter fuel specifications, and the over- the latter mainly as a consequence of economic sanctions and dependence of the industry on crude oil (Keshav and Basu, embargoes. Even today, the leading GTL technology remains 2007). the FT process (Bao et al., 2010). According to Steynberg (2004), natural gas conversion via FT Nevertheless FT is not the only process being used in GTL synthesis in a GTL plant integrates almost all kinds of plants. Other processes include the conversion of gas to high processes found in the chemical and petrochemical industry,
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