Natural gas from the North Slope must be converted into useful energy by some process. Home heating, electric generation, transportation fuels, industrial processes. None are 100% efficient. Most industrial processes, including electric generation are at best 50% efficient. Did you know that the gas turbines used to generate electricity are only about 40% to 50 % efficient. (See GTL Efficiencies PDF for more information)

The truth is that the actual GTL conversion process converts approximately 70% of the natural gas BTU into synthetic fuels. If you capture the "waste" heat for electric generation, the CO2 for enhanced oil recovery and process water to reduce energy consumption, you end up converting more BTU's in the natural gas to useful products.

Of course the finished products from the GTL process are for the most part more valuable than natural gas certainly from a National Energy Policy point of view.

The truth is that a 4 BCF/D gas line will need at least 36 TCF. No other project can be financed until the gas producers "prove" up additional reserves. While it is easy to say the North Slope contains 50 to 100 TCF of gas reserves, until they are "proven" no other project can be financed and built. A .5 to 1 BCF/D GTL project that can be economically done TODAY still leaves enough gas for a 3 to 4 BCF/D gas pipeline. Plus a GTL project will allow the gas processing plant to be built in Alaska and the NGL's to be batched down to Valdez for further processing, keeping valuable jobs and capital in Alaska.

The interior of Alaska operates on liquid energy trucked, flown or barged into the local community. Converting the local infrastructure to natural gas will cost $ millions, will require NGL extraction facilities at each location and will still require liquid fuels to be transported to these communities for vehicles. Who is going to pay for these facilities, the local community, the State? GTL's via the existing oil line will arrive at the local communities for less money and burn as clean as natural gas in most cases plus not require any change to the existing energy infrastructure.

In the 25 years that the LNG option from Prudhoe Bay has been studied, LNG from Prudhoe Bay has never been an economically attractive option. To those who believe that $6 to $8 / mmbtu natural gas price is sustainable in the Lower 48 ask your self, can the US economy support 3 times higher energy costs. I rather doubt it. The US economy grew in the 1990's because the wholesale cost of natural gas was around $2 / mmbtu. When natural gas prices hit $10 business shut down.

Integrated coal gasification combined cycle electric generation plants (IGCC) are competitive at $3.50 to $4.50 / mmbtu natural gas (see Mitretek Reports CoProducing and GreenCoal) and more importantly have air emissions comparable to natural gas fired turbines as the DOE Clean Coal Technology programs run in the late 1990's showed. Adding a GTL module to the IGCC plant improves the economics and reduces the emissions even further while at the same time producing non-toxic motor fuels and reducing imported oil.

CTL plants have been around for 50+ years, GTL for 15+ and BTL around 20+ years. The fact that several of the super majors do not have commercial GTL plants does not mean that GTL plants don't exist. It was not until Sasol developed the Slurry Phase Distillate reactors in the mid 1990's that the economics of a GTL plant were dramatically improved. Mossgas, Shell and Sasol have announced plans for over 600,000 bbl/d of new GTL plants in addition to the 300,000 bbl/d of existing plants now operating.

South Africa developed CTL's under a 1930's National Energy Policy vision design to reduce imports at a time when CTL plant technology was at best uneconomic. South Africa built its largest CTL plants in the early 1970's when OPEC boycotted the US and the price of oil rose from $2 to $40 /bbl. Sasol has taken GTL technology from over $100,000 / bbl to less than $25,000 / bbl installed cost in 50 years of internal development.
GTL/CTL plant products can not compete with crude oil products at any crude oil price. Even at $20,000 / bbl of installed cost a GTL plant can not compete below $12 to $15 /bbl crude prices and still net back an acceptable price for the natural gas. Sasol's GTL products can compete at lower crude oil prices with their new generation reactors and thus the Government subsidy program designed to protect the plants at low crude prices ended in 2000.

Gas to liquid plants are very expensive but will produce environmentally superior natural gas based "alternative" fuels for the motor fuels market. It is important to note that GTL's are NOT petroleum based. Compressed natural gas (CNG), is also an "alternative" fuel for use in the motor fuels market. Under existing motor fuels tax schedules, CNG is taxed at a lower rate than petroleum based motor fuels. If GTL's, which are also natural gas based like CNG, are taxed at the same rate as CNG, then the GTL producer will keep up to $13/bbl more of the price collected for its fuel at the pump resulting in a higher net-back to the well head and an acceptable rate of return on the plant investment. This is not additional Federal and State support, it is being taxed at the same rate as other natural gas based alternative motor fuels.

One Major Oil Company claims that any form of Federal "subsidy" is unacceptable and sends the wrong signals to the market. This same oil company gladly accepted an exemption to the "wind fall profit tax" for their Alaskan crude to help pay off their "expensive" Trans-Alaskan oil pipeline. Are these majors willing to accept subsidies when they help them, but unwilling to allow them if they help others and reduce US dependence on foreign crude oil?