Why is progress in commercialising CTL/GTL so slow?

Implications: GTL, CTL FINDING ROLES IN GLOBAL ENERGY SUPPY Iraj I. Rahmin, Oil & Gas Journal, March 24 2008, p. 22 The article gives a good overview of the status of Gas to Liquids (GTL) and Coal to Liquids (CTL). The field is very fluid with new proposals for projects coming to light all of the time. In this analysis I wish to add a perspective from the other side of the global village. The article gives an overview of the many advantages of the Fischer-Tropsch (FT) process for the production of diesel fuels and the potential role in filling the gap. Questions we might ask are why there are not more projects and why are the ones proposed seeming to progress so slowly. The answers to these two questions are complex and generally specific for a given project, but here are some general points:

Analysis:  1.       For Gas, the FT process is not competitive verses LNG

Most owners of large gas reserves have evaluated the prospect of FT process for the production of diesel. With oil at over $100 per barrel there is a clear economic incentive. However, oil at these prices has fed into the pricing of energy fuels generally and in particular the price of gas in the USA , Europe and North Asia. From the gas owners perspective, at this time, LNG generally gives a higher net-back value to the gas.
Unlike the LNG market, the FT market is not established. At this time the FT products have to be marketed as speciality products. FT diesel does not comply with the diesel specification in most industrialised countries – it has too low a density. The use of FT diesel is therefore mainly as a premium blend-stock. This complicates matters as the product has to be sold to a refiner or blender who can use it. This may change as the key players (Sasol, Shell etc.) seek to change diesel standards to facilitate the direct entry of the diesel to the market.   Naphtha is produced as a co-product (typically 25% of the diesel production). Unfortunately the naphtha is a poor refinery blend-stock which needs extensive processing to make gasoline. However, it is good petrochemical cracker feedstock.
Although the marketing of the products are easily solvable from the perspective of the refiner/petrochemical marketer, from the perspective of gas field (or coal field) owner they are somewhat a mystery, especially when compare to the single product LNG. Another apparent advantage of LNG is the far lower carbon emissions.  LNG is a physical separation whereas the FT process is a chemical transformation. LNG is produced at the site with much higher thermal efficiency than the FT process and hence considerably lower carbon emissions. For LNG most carbon emission is with the user, whereas for FT the emissions are split between the producer and user. This means from a site perspective (and producer country perspective) carbon emissions are lower for LNG. Carbon trading may help here but this is still in its infancy and it may be a decade (well beyond the next 2012 round) to establish the transfer to emission from producer to user countries to restore some semblance of balance.  
At the end of the day we have a long list (maybe too long – this is another story) of active LNG projects and a much shorter list of FT projects.

2.       FT has some technical Problems

Although FT has been around a very long time, most of the proposals for large scale FT plants use unproven variants of the technology, at least at the commercial scale. The main South African technology (Sasol and Petro SA) are based on routes that primarily give light olefins which are then oligomerised to gasoline and diesel. Over the past decade the reactor type has changed from a moving bed to a fluid-bed system but it is still fundamentally the same process – high temperature operation giving light olefin rich products. 
For producing diesel, better carbon efficiency (carbon in gas or coal to carbon in the diesel) is obtained by making wax and cracking this into diesel and naphtha. This was once practice on the original multi-tubular fixed bed ARGE reactors at Sasolburg. Nowadays these old reactors target the high value wax itself as a product.  The Shell process at Bintulu in Malaysia is a variant on this using multi-tubular fixed bed reactors to produce a wax which is subsequently cracked to diesel and naphtha.
The problem with the process is that the reactor productivity (tonne of product produced per reactor) is low for multi-tubular fixed beds and the alternative slurry bed has been developed. Slurry bed reactors have a long history of development since the early 1950s and although on the face of it have much higher productivity and are simple in practice they show several problems not faced by the older reactors. One of these known problems is catalyst attrition and separation of catalyst from the wax product and this seems to be affecting the Oryx operation in Qatar. This has delayed start up and is not expected to reach design capacity for another year.
It is of interest to note that Shell in their Pearl (Qatar) project is keeping to the older multi-tubular fixed bed reactors.

3.       There are Alternatives

For coal to liquids there are alternatives to the FT process. One of these is direct hydrogenation which was mentioned in the article and I will not discuss this technology further. An alternative that should be considered is coal to methanol and methanol derivatives.
Coal to methanol has been practiced since the 1920s. There is one commercial operation in the US and many in China. The capacity of Chinese coal methanol production has been estimated to be 4 million tonnes/year or more. Methanol can be used as a gasoline extender (practiced in China but universally opposed by the automotive industry in the West), converted to Dimethyl Ether (DME) which can be used as an LPG extender (again practiced in China) and has been proposed as a clean alternative to diesel fuel (Japan), or converted to gasoline by the ExxonMobil (formerly Mobil) methanol to gasoline process (MTG).
The MTG process was used commercially in New Zealand from in the decade from 1984 to produce 16,000bbl/d of gasoline from natural gas via methanol. The only product is gasoline and some LPG. However, unlike the FT products, the gasoline requires no further treatment or blending before sale.
In producing methanol as a tangible intermediate (i.e. a large intermediate storage tank), the process is split into two (gas or coal to methanol and then methanol to gasoline). By contrast the FT process is fully integrated from gas or coal to synthesis product which means to process can be more susceptible to process upsets.
I understand that ExxonMobil have signed a license for a CTL project in China and have a licence for the DKRW project at Medicine Bow which was mentioned in the article as a proposed FT project.
The disadvantage of this route is that it does not produce diesel.
However,  on a personal note, the author often finds himself standing on street corners of north of England industrial towns and can assure readers that there are no environmental benefits to diesel fuel, especially as is now the case, the small vehicle diesel fleet has started to age. As most  observers know  the move to diesel in Europe has been driven by the extortionate level of taxation on motor fuels not by perceived environmental benefits.  Maybe the fascination with small vehicle diesel engines will be a passing phase.  

Duncan Seddon April 2008