While the majors are building a global liquefied natural gas (LNG) trade with tens of billions of dollars, smaller players are eyeing the so-called “stranded” natural gas reserves that have missed the radar and economic screens of the LNG developers. Both compressed natural gas (CNG) and synthetic fuel (synfuel) proponents think they can compete for smaller, short-term projects for these residual reserves.
In both the case of CNG and synfuels, technology can be a major driver offering what the proponents say can be an advantage over the longer, more capital-intensive LNG projects. They are looking to complement LNG’s growing worldwide trade, not so much compete with it.
Tulsa-based Syntroleum, with a self-described one-of-its-kind technology for turning methane into “ultra-clean” diesel, is in the process of lining up a drilling partner to join with a Nigerian firm to complete delineation work to confirm the economics for taking some of the estimated 2 Bcf/d of wet gas that is flared daily off the West African coast, converting it at the site to ultra-clean diesel for shipments to markets in Europe or the United States.
“We have a proprietary technology that is unlike anyone else’s. Everybody else uses an oxygen basis for their gas in the conversion, we use air,” said Syntroleum’s spokesperson Mel Scott. “We’re taking methane gas, taking it into a facility and putting out ultra-clean diesel with a c-tane level almost twice the normal octane level in gasoline, or traditional diesel and it’s ultra-clean.”
With the super-clean diesel, the efficiency of engines is much improved and the pollution is greatly reduced, said Scott, adding that ultra-clean fuel should command a premium price, and Syntroleum’s niche is to go after stranded natural gas as the basis for this fuel supply.
Another player claiming a technological advantage emerged earlier this month in the budding compressed natural gas (CNG) oceanic transport/storage business. Houston-based EnerSea Transport LLC, announced last Tuesday it was forming a strategic partnership with Tanker Pacific in the development of what EnerSea envisions as a portfolio of niche natural gas transportation/storage projects that can both complement and compete with liquefied natural gas (LNG).
Mercuria Holdings Limited, a principal of Tanker Pacific Group, a leading gas storage player, purchased an equity stake in EnerSea, which said the added investment should strengthen its strategic position in the still ill-defined CNG oceanic transport/storage business.
Mercuria spokesperson Samuel Norton said his company expects CNG to emerge as a “complementary solution” to LNG, allowing “monetization of potentially hundreds of stranded gas fields that do not justify the capital investment required for LNG.”
With its own patented technology — “VOLTRANS” (Volume-Optimized Transport and Storage) — EnerSea is betting it can use the cost and flexibility advantages that CNG holds over the capital-intensive upstream LNG production and processing equipment to bring stranded supplies at up to almost half the volume of LNG tankers via CNG to markets around the globe. EnerSea hopes to offer flexible and less costly offshore storage and re-gasification processing for under-sea pipelines that would eventually take the supplies to market.
A combination of software, hardware, materials and processing advances allow EnerSea’s equipment to store 40-60% more gas-per-pound of steel, a company spokesperson said. It is a proprietary, patented process owned by the company, which was founded by a group of upstream oil/gas industry veterans that have deep-water engineering/operating expertise.
Both the synfuel and CNG companies emphasize they are not adjuncts to the exploration-and-production (E&P) sector because they are concentrating on known deposits of natural gas that for various reasons are outside the scope of the fast-multiplying LNG projects.
Noting that it initially worked with the U.S. Defense Department on mobile synfuel stations for re-fueling jets and other military transportation within combat zones, Scott said Syntroleum more recently has looked to smaller, civilian fueling applications.
“We can build a facility 20 times smaller than the traditional GTL (gas-to-liquids) facilities,” he said. “We took the same concept (used for the military), worked on it, modified it, and got it into a scaled-down version with a barge you can take to the gas; bring it straight from the well to the barge where it is converted to ultra-clean diesel, and it in turn is put it on traditional tankers for oceanic shipment.” (No compression or liquefaction is needed, just pipelines, storage and fuel pumps.)
While safety concerns would prevent LNG operators from adding synfuel production facilities as an offshoot of liquefaction facility in the production fields, Scott said, the Syntroleum smaller-scale barge concept can take the process offshore to free-up the otherwise unused gas for the market. EnerSea in the CNG field similarly sees its services and equipment as separate from the LNG value chain.
“If existing LNG projects are in provinces where there is more gas than can be economically handled by the LNG system and they want to monetize that, we can offer a solution that might be an interim step for volumes or market demand that isn’t quite sufficient to support additional trade as LNG,” said John Dunlop, a Houston-based spokesperson with EnerSea Transport LLC.
“But we don’t spend a lot of time targeting that (LNG-related) market because we see a lot supplies and markets around the world that are in need of their own solutions, and presently don’t have any. Even offshore (gas) accumulations are a potential market. We can take gas at offshore production facilities — particularly in the deep water — and provide storage and transport solutions.”
At this time, EnerSea has no talks ongoing with proponents of various on- and offshore LNG projects along the Southern California coast. The firm is focused on the Gulf of Mexico and has a proposal in for the Atlantic-Canada LNG project in the northeast United States or Nova Scotia, along with interests in Southeast Asia and Australia, said Dunlop, who noted the firm’s web site (www.enersea.com) will have information on additional projects later this week or next.
Marine gas transport is the focus of EnerSea, which touts its VOLTRANS technology as a “break-through” in CNG technology, making it more “efficient and cost-effective than what’s been done before,” said Dunlop, noting that they expect continued robust demand for gas and CNG having a flexibility edge in terms of what it can do compared with the more “fixed” traditional pipelines and LNG.
“You put a liquefaction plant on the ground, you have made your investment and it is not going anywhere,” Dunlop said. “It is the same way with the pipeline going from Point-A to Point B; it is fixed in capacity and location. A lot of gas sources around the world are found in places where you might have commercial or political risks that make the financing of such an investment very problematic.
“On the other hand, our system is almost entirely on the water, and most of the capital required in CNG is in the ships. The terminals that we have to move the gas and deliver it to the market are a very small fractions of that (ship cost), compared to LNG projects. So, with CNG, you’re not necessarily putting as much investment at risk. We can also re-deploy and scale-up very easily.”
According to Scott, Syntroleum sees its niche in what it calls the 1-3 Tcf gas fields around the globe that makes up “stranded gas, proven gas, but gas that has no market, such as off the West Coast of Africa–Nigeria.”
Syntroleum recently announced signing an agreement with an indigenous company in Nigeria to produce the oil and gas off a lease that is already proven. “We’re not an ‘E&P’; we’re more of a ‘P’. We go after proven gas reserves,” Scott said. We’ll bring a partner into the Aje Field, and we’re talking to several major companies about coming out to do delineation drilling.
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