03pa GM 3 5 PDF

17th World Petroleum Congress
Block 3 "Excelling in Delivering Clean Energy and Quality Products from Natural Gas"
Forum 5: GTL, Alternative Fuels and Syngas: The Latest Developments in Technology, Products and Markets Rio de Janeiro, Brazil -- September 1-5, 2002
Low-Cost Syngas and Its Role in the Gas Economy

Graham McNeillie, Head of Gas and Power Technology, BP, UK Abstract
The worlds plentiful gas supply sources, continued technological innovation, the desire for less carbon intensive fuels, and the need for cleaner air in urban areas, will ensure a significant increase in the use of natural gas as an energy source. The resulting Gas Economy will be supplied from a truly global market consisting of large gas reservoirs geographically spread but linked to consumers by a range of technologies. The development of a syngas hub at the centre of a Gas to Product (GTP) business will yield significant value addition and will require the development of new technologies that both reduce cost and lend themselves to intensive process integration. We are working hard on many fronts to make GTP technologies, particularly low-cost syngas play their part. We are aggressively pursuing this objective with our GTL Test Facility programme in Alaska, and in high-risk, highly leverage breakthrough R&D programmes such as the OTM (Oxygen Transport Membrane) alliance. Ultimately we are aiming to move beyond syngas to the direct conversion of methane to chemicals and fuels. To this end we have made major commitment supporting R&D efforts at the world leading universities of Berkeley, Caltech in the US and Tsinghua and Dalian in China.
1.0 The Gas Economy

Throughout most of our history, mans primary energy source has been wood. With the onset of severe deforestation in Western Europe, the desire for increased mobility and the development of new technology, early in the 19th century the western world moved from a wood burning economy to a coal burning economy. Early in the 20th century, largely as a result of the need to fuel the emerging mechanised military machine, we moved rapidly from the coal based economy to the oil based economy of today. It would seem to us that the world is now at the next inflexion point as the global demand growth in primary energy is supplied by gas ahead of oil and coal. For the last ten years or so, gas has taken market share in preference to oil and coal. Whilst it is not possible to be precise about the fossil fuels mix of the future, we can say with some certainty that natural gas will meet many of the mid term demands of society. Plentiful gas supply, continuing technological innovation, the liberalising of energy markets and most importantly, the desire for less carbon intensive fuels all point to an increasing demand for gas. Indeed it is possible to now envision an economy powered principally by natural gas The Gas Economy (www.bpgaseconomy.com). As we consider these shifts in fossil fuel mix we can see that we are on a journey towards cleaner, lower carbon energy sources that will eventually take us towards achieving true sustainable development. We see The Gas Economy as a major steppingstone between the old economies burning wood and coal and a world in the future fuelled by renewables. The focus of this paper is on the role of low-cost syngas and its place in The Gas Economy.
2.0 Moving Gas to Market

Whilst in many respects, natural gas having a higher ratio of hydrogen to carbon than any other organic molecule, is the ideal fossil fuel. However it is this very low carbon content that is also an Achilles heel. The energy density of natural gas is low, very low and it is this low energy density that makes gas difficult and hence expensive to transport to market. For this reason alone the gas industry has developed in areas were a gas market could be easily linked to a gas resource. An example is the US gas market and the indigenous supplies of Lower 48 gas. For the energy it takes to move a barrel of oil equivalent of gas from Norway to France, that same energy will move a barrel of oil in a VLCC twice around the globe. As we develop more and more of the worlds gas, we find it in locations more and more remote from both the existing and the emerging markets. Most of the worlds gas production is brought to the market via pipelines but geography, politics and sheer distance limit the length of even the longest international pipelines. The only other commercially viable transport means today is Liquefied Natural Gas (LNG) where methane is liquefied at -162o Centigrade, shipped to market in insulated tankers and regasified for use in conventional gas markets such as power generation. An alternative means of gas transport is to move it as electrons - Gas By Wire. Electricity is generated at the point of the gas resource; AC is converted into DC, transported up to a few thousand kilometres to the customers where the DC is converted back into AC. The energy losses incurred from transporting gas as electrons compare very favourably with the energy losses of pipelines. A significant advantage of gas by wire over pipeline gas is one of scale. Gas by wire appears to work at an equivalent of say 600mmcfd when a pipeline would have to move maybe 2bcfd to be economic. Does GTL FT offer a sensible way of moving gas to market? We believe that the fundamental energy losses associated with the production of syngas from methane means that the GTL technologies of today will not be competitive as simply a gas transport mechanism, the products have to have distinctive advantages that customers are willing to pay for. Whilst we can be sure that the costs of GTL syncrude will fall, the costs of the alternative routes to market, namely pipelines and LNG will also fall. GTL as syncrude will struggle to catch up.
Moving Gas to Market

Option to Bring Remote Gas to Market
Pipelines LNG Power Generation
Supply
GTL Gas by Wire
Markets
Create New Markets Natural Gas Conversion

Natural Gas
Transportatio LPG Substitute as Domestic Fuel Chemicals Fuel Additives Fuel cells Hydroge Power
Figure 1 - Moving Gas to Market
3.0 Extending the Market Reach of Gas

The traditional markets for gas have been low cost space heating and high energy industrial manufacturing e.g., steel and glass production. Of course more recently the advent of CCGT power generation has sparked a huge shift in power generation fuels from coal and oil to gas. CCGT has enabled lower capital cost plant to be built at smaller scale and more quickly than coal or oil based
plant. This trend is set to continue for some time and CCGT power together with COGEN and space heating will remain the dominant consumers of gas The territory that syngas based products have occupied is not insignificant when measured in gas volume terms. Today, gas conversion is the basis of sizable though dispersed industry consuming the equivalent of 4 TCF of gas a year. This is about the same size as the LNG industry in terms of volumes of gas monetised. Hydrogen from syngas is a growing market for use in refinery hydrocrackers. Syngas is the key intermediate for the production of fertilizer (ammonia/urea) critical for the feeding of the worlds 6 billion people. Methanol is a key product that has been manufactured from methane via syngas for may decades In its turn methanol finds its way into a wide base of high value chemicals and the fuel additives. Examples of these high value products include formaldehyde, acetic acid and MTBE. It is true that the markets for these chemicals have been traditionally rather modest, however as the costs of syngas manufacturing reduce, so the options for a methane to chemicals route grows. BP, together with Methanex, have recently commissioned a 2500tpd methanol plant on Trinidad and on the same site we are now constructing a mega methanol plant at twice world scale - 5000tpd. Figure 2 shows how the costs of methanol production have been falling consistently over recent years. These cost reductions have been achieved almost entirely off the back of lower cost syngas. In turn the lower syngas costs has been achieved through driving the economies of scale of both oxygen plant and gas reformers.
Methanol capital costs are falling

EPC Comparison
600 500 $/ 400 mt 300 pa 200 100 0
Industry Norm Tit an
Atl as
Titan Trinidad 1.7mtpa facility started operation 2000 Atlas Trinidad 3.4 mtpa facility start-up 2004
Figure 2 - Methanol Capital costs are falling
4.0 The World of Syngas Low cost s yngas can open a world of opportunity
CH 4
CO + 2 H 2 Syngas
HYDROGEN
SYNCRUDE
METHANOL
Aceti cacid
Ammonia Refinery Products

Direct Transportation Fuels
Clean Naphtha Diesel Jet Fuel Lubes
Formal -dehyde
DMM DME Syn-LPG Direct Transportation Fuels
Olefins
Transportation
Fuels & Chemicals
Fuel Cells Power
Fuel Cells
Fuel Cells Power
Figure 3 - The World of Syngas By virtue of its almost perfect symmetry, the methane molecule is a hard nut to crack when it comes to attempting chemical conversion. Methane wants to be methane or be fully oxidised to carbon dioxide and water, achieving any state between is intensely difficult. Capturing the partial oxidation of methane at the syngas stage is energy intensive and hence very costly, this intermediate step of syngas production consumes between 50%and 60% of the total capital of any of the methane conversion routes. For many years researchers have worked to develop catalysts that will achieve the direct conversion of methane to other molecules without having to pass through the syngas step. Whilst our knowledge of the fundamentals of catalysis has been growing rapidly in recent years, it will still be many years before direct conversion catalysts are available in commercial quantities. In the meantime we have to make do with the syngas reaction and the huge capital sink that it represents. Notwithstanding, the costs of syngas manufacturing are falling and as cost falls, so the opportunities for syngas based products grow. Firstly thinking about products for the transport sector, we are now seeing quite a number of GTL projects enter engineering FEED. These projects are being promoted, where the cost of gas production is low or even zero, where Governments are willing to offer fiscal incentives, and where the cost of construction is also low. There are many projects being studied that are based on a stand-alone GTL- FT based business based on selling premium fuels into the transport sector. When considering the long-term viability of these highly capital intensive projects our view is that the picture is not simple. There will be circumstances where this type of GTL business should work and make money. However we believe that this will generally be a niche play and will never become a materially significant business when measured against the global production of transport fuels from conventional oil. The world has simply sunk too much capital into the refining stock. At the end of the day the refiner can, broadly speaking, match the quality of GTL fuels without further wholesale re-injection of large amounts of capital. For us in BP, stand-alone GTL for transport fuels will always be a niche business. How big that niche will prove to be is a key question. When we think of positioning GTL as the basis of a business, we have to think both more deeply and more broadly. Whilst we dont believe that stand alone GTL serving the transport sector is going to develop rapidly other than in a few highly selected areas, we do believe there is the opportunity to build a business through the careful integration of a Gas to Products (GTP) site with other gas based activity e.g. LNG. We have coined the term, the syngas hub and we are working hard to better understand how it is possible to extract additional value from such a hub located on a truly integrated site producing chemicals feed-stocks and high value niche products. Such a site would exhibit intense energy efficiency to the extent that CO2 and other emissions would become all but negligible.
5.0 BPs Gas Technology Platform

BP has been working to advance GTP technology since the mid-1980s. Our current efforts include the GTL Test Facility in Alaska, the Oxygen Transport Membrane (OTM) alliance, and two programmes with leading universities.
5.1 Alaska GTL Test Facility

BP has invested $86 million in a GTL test facility in Nikiski, Alaska. The primary focus of the facility is to reduce the cost of syngas production by utilizing the BP Davy Compact Reformer technology. The test facility will convert about three million cubic feet of natural gas into an estimated 300 barrels of synthetic crude a day. The facility is scheduled to begin operations during the second quarter of 2002. The compact reformer syngas technology that will be tested has been developed over the past ten years at BPs Warrensville (Ohio) and Sunbury (UK) research centres, in collaboration with Davy Process Technology, one of the worlds leading process developers. The basic concept of the compact reformer is a modular tubular reactor, which allows close integration of combustion on one side with catalytic steam reforming on the other side. This unit demonstrates highly intensive reforming with enhanced thermal efficiency when operating within the conventional process envelope of steam reformers. The resulting reformer design has the following key characteristics: An intensive compact design giving reduced footprint in both the reformer box and the waste heat recovery section. Increased thermal efficiency due to the large internal heat recycle compared to a conventional reformer. Standard design giving opportunities for factory-built mass production, resulting in significantly reduced site construction man-hours and schedule. Sufficiently compact design to allow commercial-scale units to be transported to offshore platforms or remote sites for stranded natural gas operation. No need for an oxygen plant. Scaleable technology economically viable through a wide range of scales. Other process units being demonstrated in Alaska include a Fischer-Tropsch Converter, using proprietary BP catalyst, to produce paraffin wax, and a hydro-cracker to produce syncrude. GTL technological and engineering advancements tested at this facility, as well as traditional value engineering, are projected to reduce the capital cost of a GTL facility to less than $20,000 per B/D.
5.2 Oxygen Transport Membrane Alliance (OTM)

To further reduce the capital cost of syngas manufacture, BP is participating in technology development programmes with other organizations. The OTM Alliance is an example of a high-risk, highly leveraged project to significantly lower the cost of producing syngas. The OTM Alliance started in 1997 with BP, Praxair, Sasol and Statoil. Foster Wheeler and DOE funding were added in 2001. The objective of this programme is to reduce the capital cost of producing syngas by employing oxygen transport membranes instead of using a separate oxygen production facility. The technology integrates oxygen transport from air, exothermic combustion of fuel, and endothermic reforming of methane on a catalyst to produce syngas and is based on fundamental science developed at both BP and Amoco prior to the merger.
5.3 Consortiums with Leading Universities

Looking into the future, we are funding two long-term programmes one in the U.S.A. and one in China to seek the knowledge and technology to drive the costs even lower.
5.3.1 The Methane Conversion CooperativeMC2

BP has awarded two leading universities -- the California Institute of Technology in Pasadena (Caltech) and the University of California at Berkeley -- a 10-year grant totalling $20 million to advance the frontiers of gas conversion research. Each of the universities has a combined school of chemistry and chemical engineering, noted around the world for innovative research in catalysis and process engineering. The grant will help support up to 10 faculty members and around 25 graduate students and postdoctoral fellows. Key objectives are to understand the fundamentals of methane activation,
develop fresh ideas and approaches, and effectively move technologies from the university laboratories into the market place.
5.3.2 Chinese Academy of Science and Universities of Tsinghua and Dalian

In November 2001, BP established the Clean Energy: Facing the Future programme in China with the Chinese Academy of Sciences and Tsinghua University. BP will provide $10 MM over a 10-year period to fund research in new clean energy technologies. One study will involve the modelling of large systems that arise from the production of many products as well as electricity from a syngas based complex. An initial project is the direct conversion of methane to hydrogen and aromatics. We look forward to strong collaboration and creativity to arise from interactions between the Clean Energy: Facing the Future programme and our university programmes at Caltech and UC Berkeley.
6.0 Summary
In recent years we have been developing a great deal of new technology, as these technologies approach commerciality, we are seeking to understand the way forward that will create real added value from syngas and not simply consume capital in the quest to do big projects This session of the 17th World Petroleum Congress -- Forum 5: GTL Alternative Fuels and Syngas -recognizes the increasingly significant role of natural gas as the feedstock for many products and energy sources in the future, as well as the special place that syngas plays as the key-intermediate product for methane conversion processes such as GTL and methanol. Low cost syngas has an important part to play as we enter the Gas Economy an economy fuelled by natural gas.

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17th World Petroleum Congress

Low-Cost Syngas and Its Role in the Gas Economy

1.0 The Gas Economy

2.0 Moving Gas to Market

Moving Gas to Market

GTL Gas by Wire

Create New Markets Natural Gas Conversion

Figure 1 - Moving Gas to Market

3.0 Extending the Market Reach of Gas

Methanol capital costs are falling

600 500 $/ 400 mt 300 pa 200 100 0

Industry Norm Tit an

Ammonia Refinery Products

Clean Naphtha Diesel Jet Fuel Lubes

DMM DME Syn-LPG Direct Transportation Fuels

Fuels & Chemicals

Fuel Cells Power

Fuel Cells Power

5.0 BPs Gas Technology Platform

5.1 Alaska GTL Test Facility

5.2 Oxygen Transport Membrane Alliance (OTM)

5.3 Consortiums with Leading Universities

5.3.1 The Methane Conversion CooperativeMC2

5.3.2 Chinese Academy of Science and Universities of Tsinghua and Dalian

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