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Diesel fits into a gas idea for fuel

WA’S almost embarrassingly plentiful natural gas reserves will be put to use in producing a commonplace fuel, if a current study by two oil industry giants produces positive results.

Unlike some of the other gas-to-liquids proposals at an advanced stage, the Sasol Chevron joint venture would produce diesel, widely used in Australian truck and bus fleets, but not much by private motorists.

It is the opposite in Asia, where three times as much diesel as petrol is used, offering an attractive export market for a project that could ultimately produce 200,000 barrels a day – nearly a third of Australia’s current consumption of petro-leum.

Globally, natural gas is seen as the glamour fuel for the next 20 years, offering environ-mental advantages over oil, but suffering until now from liquid fuel’s versatility.

Gas has to be piped, or carried by large, expensive thermos flasks, LNG carriers, in a deeply frozen form.

There are a number of technologies for converting gas to handier products, but the diesel route is particularly attractive because many of the world’s vehicles already use it.

But for an accident of history, the diesel engine could have been the preferred form of employing hydrocarbons to drive horseless carriages.

It is much more economical (hence its widespread use in Europe, where petrol has always been expensive, compared with the US), produces less harmful emissions, and requires less maintenance.

Mass produced petrol engines, pouring from American factories in particular, meant that gasoline, or petroleum, would be used in most of the world’s private vehicles, but that trend could be reversed.

Increasingly stringent requirements over emissions give diesel fuel the edge, especially with the latest technology producing almost no sulphur residues.

In heavily polluted Asian cities the attractions are obvious, but even in the US diesel (and other new technologies) will make inroads into petrol’s dominance.

Herein lies a glittering oppor-tunity for WA.

The Sasol Chevron Joint Venture has begun a commercial feasibility into establishing a gas to liquids plant which would probably be built close to the vast gas fields off this coast.

A central issue in the initial studies will be the extent of government incentives that could be offered, as the plant competes with other possi-bilities in Malaysia, Indonesia, Venezuela, the Carribean, Alaska and the Middle East.

Sasol Chevron is seeking to build three plants worldwide to convert natural gas to con-ventional diesel fuel, a route which the two companies believe offers immense opportunities in terms of reducing emissions, and exploiting gas reserves which otherwise are difficult to exploit.

Between $10 billion and $20 billion will be invested in the venture in the next five to 10 years, with $2 billion required for a plant in Western Australia,

It would initially produce between 30.000 barrels and 45,000 barrels a day of diesel fuel, naphtha and LPG, to be expanded over a decade to reach a capacity of 200,000 barrels a day.

At this level the plant would require 21 trillion cubic feet of gas (a number hard to grasp) over the project’s life, about three times that required for current LNG contracts being filled by the North West Shelf consortium

The gas rich basins off our coast (including part of the Timor Sea) are seen as prime targets to supply a diesel plant, for they hold the majority of uncommitted gas reserves of at least 120 tcf known to exist in Australia.

In a “project auction”, which is quite common in major resource ventures, Sasol Chev-ron has warned that although Australia has been identified as an attractive country in which to establish a gas-to-liquids fuel industry, without appropriate government fiscal and regulatory incentives the country could be well be passed over.

The current commercial feasibility study should be completed in the third quarter of this year and if later more detailed studies are positive a plant could be commissioned in 2005-2006.

Sasol and Chevron began working together on the concept 18 months ago. Chevron is a partner in the North West Shelf Joint Venture – and in the undeveloped Gorgon project, which also holds vast gas reserves.

Sasol has been operating in South Africa for half a century, began producing liquid fuel from coal when embargoes restricted oil imports, and in recent years has successfully modified the process to convert natural gas.

It currently produces about 140,000 barrels a day from coal and another 60,000 barrels a day comes from natural gas, using Sasol technology.

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