GTL ’15: Small-scale methanol seen as solution for flared gas in US

By Ben DuBose
Digital Editor

HOUSTON -- Small-scale methanol technologies are becoming an increasingly viable option for companies to economically process flared gas from the Bakken, a leading industry consultant said Wednesday.

Uday Turaga, founder and CEO of ADI Analytics, explained that with as much as 40% of Bakken gas being flared, the industry urgently needs solutions at a smaller-scale.

"This is a scale issue where existing monetization technologies don't operate well at this particular scale," said Turaga, who spoke at the GTL Technology Forum. "Technologies need to be able to handle from 50,000 to 300,000 cubic feet/day to make use of this tremendous amount of resource that, right now, is being flared."

Additionally, with states such as North Dakota working to limit flaring, that puts eve more pressure on operations at the micro-scale level to monetize these gas supplies.

"The conversion of gas to methanol is attractive at the small-scale level, as methanol prices have tracked those of oil," Turaga said. "Plus, there's a wide range of end uses.

"Small-scale methanol plants have higher capital costs, but they can certainly be economically viable if the gas can be sourced cost-effectively," he added.

LNG remains the preferred option to process gas on a larger-scale, Turaga explained, but the flaring problem also requires smaller solutions.

"Natural gas flaring coupled with promising pricing, mature product markets and various end-uses are driving interest in small-scale methanol," he said.

In terms of the economics, Turaga pointed to the 10-year minimum methanol price ($171/ton), the 10-year average ($436/ton) and the 10-year maximum ($552/ton). Of those, only prices near the bare minimum pose a threat to the economic viability.

"Small-scale units will have higher capex per ton of production, but they benefit from cheap feedstock gas," Turaga explained. "If it drops to minimum, that’s when these plants will be significantly distressed. 

"In most cases, pretty good chance that small-scale methanol plants will make money," he said.

The risks of investing in small-scale methanol include the race for technology, competition from large US plants starting up operations in the second half of this decade, and uncertain regional demand for products.

Companies including Air Liquide, Maverick Synfuels, Oberon Fuels and Primus are all developing small-scale methanol technology, the ADI executive said. However, commercial demonstration is still pending in all cases.

But with shale supplies seeming to expand by the day, commercialization likely isn't far away.

"The growing supply of cheap gas is really driving interest in gas monetization options here in North America," Turaga said. "One of our key findings for the industry is that we need to move away from this mindset of scarcity to one of surplus feedstock, and how do we develop technologies to use all of this feedstock."

The GTL Technology Forum continues through Thursday at City Centre in Houston.

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