GTL Base Oils by 2008?


The Royal Dutch/Shell Group and Qatar Petroleum signed an agreement Monday to build a 140,000-barrel-per-day gas-to-liquids refinery – a plant that could become the first large-scale plant to produce GTL base oils.

Shell said it plans to invest U.S. $5 billion in the project, which includes development of a Qatari natural gas block. The refinery will be built in two stages in Ras Laffan, Qatar, with operations beginning in 2008 or 2009.

Shell said the plant will produce primarily naphtha and transport fuels, with a smaller quantity of normal paraffins and lubricant base oils. Representatives declined yesterday to elaborate on the base stocks component but predicted those stocks will make a splash in the lubricant industry.

The base oil coming out of that plant will be a very high quality product, a spokesman said. There will be a ready market for it.

In recent years there has been growing anticipation in the lubricants industry about construction of large-scale GTL refineries – plants expected to be capable of producing base oils that perform on par with polyalphaolefins but at significantly lower manufacturing costs. GTL technology has existed for decades but has not been widely used because it was not viewed as cost-competitive for production of diesel fuel, likely to be the main product of large GTL plants. Analysts have predicted that GTL will become cost-competitive toward the end of this decade when regulations requiring cleaner fuels raise the costs of diesel made through traditional processes.

Only two gas-to-liquids refineries exist today – a small 14,700-b/d plant operated by Shell in Bintulu, Malaysia, and a 30,000-b/d plant operated by PetroSA in Mosselbay, South Africa. Production at Bintulu includes approximately 1,500 barrels per day of waxy raffinate that can be used as a feedstock for base oils. The Mosselbay plant produces fuels and petrochemical feedstocks but nothing for base oils.

South African energy company Sasol, a partner in PetroSA, has entered its own agreement with Qatar Petroleum to build a 34,000-b/d GTL plant in Qatar. A Sasol spokesman said yesterday that the company is considering making base oils a component of that plant but has not yet decided.

At least one market observer said yesterday that it makes sense for Shell to build a large-scale GTL plant and for that plant to include base oils.

They have experience from operating the Bintulu plant, they have some experience marketing these higher quality base oils and they use Group III base oils in their own lubricant business, said H. Ernest Henderson, formerly of Syntroleum Corp., a Tulsa, Okla., firm that scrapped plans a year ago to build a GTL specialties plant in Western Australia. He currently does consulting work for SK Corp. and Lithcon Petroleum USA Inc. This project also has a much better chance of being completed because its being undertaken by a major oil company with the resources to finance it.

Syntroleum gave up on its plans after failing to obtain financing.

While the Shell-Qatar project is clearly driven by fuels concerns, Henderson agreed that base oils from the plant will have a significant impact on the lubricant industry. Hesaid he expects other companies will also build big GTL plants thatproduce base oils.

Clearly the fuels market is going to create needs and opportunities for GTL refineries, Henderson said, and in any GTL project there should be flexibility to produce some type of waxy raffinate that can be turned into base oil. I would expect that most any GTL fuels refinery is going to include a base oil component.

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