Three events have crystallised, for The Slug anyway, in this latest phase of the GTL debate. One has just happened, another is scheduled for early June, and a third involves a major shift in thinking by one of the world’s biggest energy consumers, the US Defence Department.
Last week’s event, not that too many people in the petroleum world noticed, saw the opening of the world’s biggest ammonia plant on the Burrup Peninsula near Karratha on the north-west coast. In a sense, the Burrup project is a GTL plant because the process of making ammonia chills the gas down to around minus-33C. The end product, however, is destined for use as a fertiliser, not a fuel.
Next month, also with minimal fanfare outside the Middle East, the world’s most-advanced GTL plant will be officially opened in Qatar. The Oryx project of South Africa’s Sasol group will produce an initial 34,000 barrels per day of high-quality diesel, rising eventually to 100,000bpd – and perhaps more in the future.
The future event in this fast-moving world of GTL was a report in the US that the Pentagon has shifted synthetic fuels to the forefront of its planning as the squeeze on conventional fuels gets tighter. Defence planners are keen on the Fischer-Tropsch process that has been refined over the years by companies like Sasol, first as a source of replacing oil, but now as a source of ultra-clean fuel derived from gas or coal.
These final two developments, the opening of the Oryx project and the revised thinking in the Pentagon, relate strictly to supplying much-needed transport fuels. The Australian event is about making fertiliser; and that’s as far as it goes.
In fact, it is worse than that. The investors behind the Burrup Fertilisers ammonia plant are talking loudly about not investing any further in the Australian gas industry, for a very simple reason: the gas is too expensive.
They say plans for a $1.5 billion urea plant, which would also supply fertiliser to Asia, are effectively on hold unless a contract supplying cheap gas can be obtained.
Threats to walk away from GTL projects in Australia are not new. There have already been a series of projects proposed and failed because of either the price of gas, high construction costs, or fear of union militancy.
The common thread linking the Australian GTL experience (should that be non-experience), is that we just can’t create the right balance of price and investment environment which encourages GTL development.
This comes back to The Slug’s first point, is this in the category of lost opportunity or the market at work?
True believers in the market determining what investment is made will say that it is the market, and that GTL projects must stand on their own, without government encouragement.
Deeper thinkers will be wondering why organisations that plan decades ahead, such as the Pentagon, are changing their thinking about GTL and other synthetic fuels.
The time might be getting closer for Australia to debate the merits of a GTL policy, including the allocation of a portion of gas reserves for future GTL production, and tax incentives for GTL investment.
In fact, it might even be time for Australia to include GTL in a major re-think of its overall energy policy to catch investment opportunities, and ensure future supplies of scarce liquid fuels.
