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Talisman-Sasol Partnership Moves Forward with GTL Feasibility Study

The technical portion of a feasibility study of a gas-to-liquids (GTL) project in Western Canada, which is under consideration by Talisman Energy Inc. and Sasol Ltd., is expected to be completed during the fourth quarter of this year, according to the Foster Wheeler AG subsidiary that will perform the study.

"There is strong interest in examining potential monetization alternatives for the significant North American shale gas resources, including conversion into liquid transportation products to take advantage of the price dislocation between gas and oil products," said Foster Wheeler Interim CEO Umberto della Sala.

In addition to the technical work on the feasibility study, Foster Wheeler said it will develop a cost estimate to allow Talisman and Sasol to assess the economic viability of the proposed facility.

Sasol is leading the GTL study with a front-end engineering design decision likely in the second half of 2012. The partnership has yet to announce a specific site for the proposed facility, but has said it is considering locations in Alberta. The facility would convert shale gas to GTL naphtha, diesel and liquefied petroleum gas.

As part of a C$1.05 billion deal last year in which Calgary-based Talisman sold a 50% working interest in its Farrell Creek assets in the Montney Shale to South Africa-based Sasol, the partners said they would weigh the market viability of converting gas to liquid fuels using Sasol's GTL technology (see Shale Daily, Dec. 21, 2010). Such a facility "could provide a strategic alternative to traditional North American pipeline or LNG [liquefied natural gas] marketing," Sasol said at the time. The deal closed during the first quarter.

Talisman said the deal would allow it to develop the Farrell Creek area and unlock some of the value of the estimated 44 Tcfe of net contingent resource it holds across the Montney Shale play in northeastern British Columbia. Farrell Creek represents about 22% (9.6 Tcfe) of Talisman's resource potential in the play and about 27% (51,000 net acres) of the company's 190,000 net Tier 1 acres of land in the Montney.

In response to the Talisman-Sasol deal, analysts at Credit Suisse said production from North American shale plays is breathing new life into the GTL process (see Shale Daily, Jan. 3). High oil prices have lifted producer interest in liquids-rich natural gas plays and have pulled up the economic attractiveness of converting gas to liquid fuels and other products, they said. A GTL plant in the region could probably produce gas liquids for about $75-80/bbl based on the full-cycle well costs in the Montney, according to one LNG analyst (see Shale Daily, May 19).

In March Talisman deepened its strategic relationship with Sasol by selling it a half-stake in its Cypress A assets in the Montney Shale for C$1.05 billion (see Shale Daily, March 9).

Sasol has operating GTL projects in South Africa and Qatar, a project under construction in Nigeria and proposed developments in a number of countries around the world.

In other GTL news, a Wyoming state legislative committee said this week it would pursue legislation providing matching funds for part of the estimated $5 million cost of a study of the potential for turning rich natural gas and coal resources into gasoline. Casper, WY-based Nerd Gas Co. hopes to build the complex on land it owns south of Sheridan, WY (see Daily GPI, June 24). Plans call for first developing a natural gas-to-gasoline facility, and later developing the coal-to-gasoline part of the envisioned facilities, according to Nerd representatives, who said they intend to pursue partnerships with majors, such as ExxonMobil Corp., BP plc, Royal Dutch Shell plc and Encana Corp.

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