[ROCKMAN]

Simon - As much as I'm naturally bitterly opposed to the govt getting involved with my business anymore than is absolutely necessary it's difficult to imagine such a big step change as the US motor fleet switching to GTL products without significant govt involvement. Probably the same with any significant push into any of the alts. All you need to believe is that the govt will do a good job of choosing between winners and losers.

TheAntiDoomer - I'm really, really curious: do you think I would like to see a big push into GTL or if I think that works against my interests. You seem to have a strong opinion on that matter but I'm not exactly sure what it is.

[rollin]

The main idea behind using catalysts is to reduce the energy loss in converting the fuel. A standard NG to liquids conversion loses 40% of the energy in the conversion process. With catalysts, it might only be a few percent, thus producing more product at lower cost.

So when can we expect to see new service stations selling this cheap ($2) fuel in our neighborhoods? Maybe it will be called Naturaline. I be the gas lines would be blocks long at those prices.

Or will it just be mixed in with our oil/ethanol derived gasoline and just fatten the wallets of the businessmen? Maybe the government will mandate 10 percent Naturaline in gasoline, thus giving us a $0.15 break in price.

[ROCKMAN]

rollin - And thus the $64,000 question: how much would NG have to be selling for to get $2/gallon fuel to the market? Is it $2/mcf? $4.25/mcf? $12/mcf? Does that $2/gallon price include the tens of $billions the builders of those GTL plants will have to receive to justify the investment? And any factor: if oil will be less available in the future there will be less fuel derived from oil so it's difficult to imagine it will be very abundant or cheap. So if fuel derived from oil sells for $4/gallon why would a GTL producer sell their fuel for $2/gallon? If they price it at $3.50/gallon they should be able to sell all they have as fast as possible. So the GTL fuel would be selling for 150% more than that magical $2/gallon number being tossed around so loosely.

Folks often seem to forget that no commodity sells for cost + a fixed profit margin. I sell my oil in one county in Texas for $98/bbl. The operator across the lease line sells his for $98/bbl. My cost to get that oil out is $44/bbl. His is $64/bbl. So is someone expecting me to sell my oil for $20/bbl less than he is? Of course not. So if a GTL fuel producer can make fuel for $1/gallon and the market is willing (and actually happy) to pay $3.50/gallon why would he sell it for $2/gallon?

All these pie in the sky ideas that X can be produced for $Y automatically assume the makers of X will sell it for $Y. It's as if they have no concept of the free market system and how any commodity price it determined. It's like the folks who think the current price of oil is determined by how much it costs us to find and produce it. That relationship has never existed in the oil patch...ever. It's the price of oil/NG that determines how much we can spend to find and produce it. Always has been and always will be.

[rollin]

Rockman, that is what I was wondering about. Why would they sell at $2 except to make market penetration. You are probably right, they could sell it at a small discount and make the market penetration while paying for the continued building out of conversion plants.
With the volatility of natural gas prices, it does not seem a very safe bet. They could lose their margin before the plants are paid off. Unless they also control the source, which is unlikely.

In the old days some railroads would own their own coal mines. The coal mines would be forced to operate at minimal or no profit while the profit went to the railroad that transported and distributed the fuel to the consumers. I doubt if that scenario would happen in the natural gas field unless a big player got interested.

[ROCKMAN]

rollin - About that NG price volatility: this morning I heard some yahoo on NPR predict that NG prices would stay in the $4 -$5 range for the next 2 DECADES, at least. As I've said before I avoid making oil/NG price predictions: I rather let some folks suspect I'm stupid and not provide them with poof. I won't take up the space again but I've highlighted just how volatile NG prices have been in just the last 8 years. And he's confident he can predict NG accurately for at least the next 20 years? I wonder how much of his money he's invested in NG futures based upon such confidence. If he has (and he’s correct) he’ll be a billionaire in no time.

Nothing easier then making a bet when you have nothing wagered.

[toolpush]

http://www.velocys.com/press/ppt/ppt131 ... a_2013.pdf

Pages 9 and 10

Here is GTL from the other end. Micro scale, 1000bpd up 15,000bpd coming to a gas field near you. An excellent method of attacking the issue of flared gas.
Page 9 & 10 has some rough costings, but with $4 Nat gas 100 per barrel Capax, the cost of production is about $70 per barrel. if it is used for flare gas, then obviously it would be cheaper, as the gas cost is either zero or even can be a negative cost as there could be fines attached to flare, or there should be, if there isn't. GTL doesn't have to be big these days.

[ROCKMAN]

And there also small skid mounted NG fired electric generators that can use flare gas. Cheaper to run electric lines than pipelines. But we're still back to the caped requirement for whatever infrastructure is required. But it doesn't matter if the economics look good on paper if investors don't invest. As I've said many times I don't like the idea of the fed gov't crossing over into the free market but this is one area it might help...if they did it properly.

[Subjectivist]

And there also small skid mounted NG fired electric generators that can use flare gas. Cheaper to run electric lines than pipelines. But we're still back to the caped requirement for whatever infrastructure is required. But it doesn't matter if the economics look good on paper if investors don't invest. As I've said many times I don't like the idea of the fed gov't crossing over into the free market but this is one area it might help...if they did it properly.

Aye there's the rub, the government so seldom does anything in the most rapid, efficient, and taxpayer friendly manner.

I like the idea of miniature reformulation units preventing the flaring of natural gas, and as I understand it the resulting gasoline could just be added into the crude oil produced and hauled to the refinery along with it.

[toolpush]

Certainly the plants they intend to install on FPSOs, the resulting liquid fuels will be put straight into the pipeline, and it will be diesel produced rather than gasoline. Onshore, the resulting diesel can be used locally.

These plants are not just designed for flare gas. The plants currently being engineered are generally inn gas producing areas, rather than the oil producing areas. Personally I just feel it is the perfect solution for flare gas, especially in Bakken where there is a shortage of Diesel, and I hate watching gas being wasted by flaring.

The economics laid out in the PPT,is not for flare gas, but for pipeline gas at $4 mscf, flare gas is just a bonus, as it is free.

[ROCKMAN]

But back to the bottom line, boys: anyone can go cut a deal with any company flaring NG and get it for free. All you have to do is pay for the equipment, operating expense, royalties and state taxes. Then the profit is all yours. So there you go: free money. LOL.

[Graeme]

Natural gas by the quart: Shell's new oil isn't crude

Natural gas probably isn't running your car, but it may soon be lubricating your engine.

Royal Dutch Shell, which owns Pennzoil, Quaker State and other brands, is announcing Friday that it has already started selling a premium motor oil that is derived from natural gas and not crude.

The process begins with Shell's $19 billion Pearl GTL, a gas-to-liquids facility in Qatar, where the company converts natural gas into a variety of fuels and feedstocks, including the base oil used to manufacture the motor oil found on the shelves of auto supply stores.

Shell began producing base oil at Pearl in 2012. But while base oil is typically derived from crude, the company said it now will use only base oil made from natural gas at Pearl for its premium motor oil brands.

"Shell is unique in having this product, and they are not selling it to others, and it will make a great motor oil, there's no doubt about it," said Stephen Ames, managing director for SBA Consulting, which consults for the lubricants and refining industries. "Will it be better than other people's motor oil remains to be seen."

Shell's base oil from natural gas is cheaper than that derived from crude, which Ames said gives the company an advantage.

chron

[Plantagenet]

A new chemical method can cheaply convert natural gas into alcohol, a liquid fuel that can replace gasoline in many applications in the transportation market.

Who needs oil when you'v got Natural Gas?

Whew....thats a relief. Peak Oil isn't such a big problem if we can use NG to replace oil. After all, the USA has a 100 year supply of natural gas. Just convert it to alcohol and power up the dragster and go.

PROBLEM SOLVED.


alcohol engine used in drag racing...VROOOOOOOOOMMMMMMMM!!!!!!

[GHung]

That dragster engine has to be rebuilt after every race.

The sure sign of peak oil is the amount of bargaining going on. The car culture is non-negotiable, though reality doesn't negotiate. That most people don't have any concept of scale is becoming very clear. I talk in terms of 90-100 million barrels a day and their eyes just glaze over and they get a stupid little smile like they need to go to the john.

[Pops]

Yeah, we'll heat our homes with it, and run our cars, and have a resurgent chemical and manufacturing industry . . . oh and switch over all our electrical generation . . oh, oh, and export it to everywhere too!

We're Saved!

[Plantagenet]

The knock on NG as a transportation fuel has been its low energy density.

Alcohol, in contrast, in some ways is a superior liquid fuel to gasoline. It has a slightly lower energy density, but high octane levels that make it very comparable to gasoline as a liquid fuel. In fact in some applications alcohol may be better---thats why drag racers run on alcohol.


Vrrooooooommmmmm!

[Plantagenet]

The sure sign of peak oil is the amount of bargaining technological innovation going on.

There. Fixed that for you.

[GHung]

Plantagenet, you haven't fixed the problems of costs at scale, a financial sector bent on implosion, and a finite feed stock that already has massive claims on it. With out fixing those things, your technological innovation becomes a niche market rather than the liquid fuel of choice for an $85 trillion global economy. Most people aren't even aware that there's a problem. Vroooom!

Think systemically.

[dolanbaker]

A new chemical method can cheaply convert natural gas into alcohol, a liquid fuel that can replace gasoline in many applications in the transportation market.


Whew....thats a relief. Peak Oil isn't such a big problem if we can use NG to replace oil. After all, the USA has a 100 year supply of natural gas. Just convert it to alcohol and power up the dragster and go.

PROBLEM SOLVED.

I have 4000 willow trees in my garden, If I cut 40 a year, then I have 100 years worth, but if all of a sudden I create a massive demand for them, then I may have to cut 400 a year to satisfy that demand.

Now I only have 10 years supply!

In real life I coppice so they grow back.

[Plantagenet]

Plantagenet, you haven't fixed the problems of costs at scale, a financial sector bent on implosion, and a finite feed stock that already has massive claims on it. With out fixing those things, your technological innovation becomes a niche market rather than the liquid fuel of choice for an $85 trillion global economy. Most people aren't even aware that there's a problem. Vroooom!

Of course not.

1. But trying to dismiss an important scientific innovation as "bargaining" is itself an example of bargaining. Science and technology are real things that have real impacts on our economy and our society. This discovery is potentially a significant breakthrough.

2. The chemical innovation that permits alcohol to be cheaply produced from NG is new. Its pointless to criticize this new innovation because there is no financing or infrastructure in place to utilize it now. Of course there is no financing or infrastructure for turning NG into alcohol---this discovery has just been announced to the public.

VVVVVrrrrrrrrooooooooooOOOOOOOOMMMMMMMMMMMMMMM!!!!!!!

[GHung]

Plantagenet, funny how you totally ignore the part where natural gas production is largely spoken for. It doesn't matter how cool the technology is if some retiree in New Jersey is seeing his heating and electric bills go through the roof so people can drive their new alcohol fueled cars. If you're trying to drive the price of natural gas up, just say so.

Don't forget to account for your waste streams, or the rising costs for food, since industrial agriculture relies on the same feed stock.