Shale gas to liquid to lower price at pump

Houston Chronicle:

Drivers are next in line to benefit from the U.S. shale boom.

Technologies that create motor fuels from raw materials other than oil, some drawing on techniques first commercialized in Nazi Germany, are poised to turn the glut of U.S. natural gas into energy for cars, trucks and planes.

A Chesapeake Energy-backed company and Oxford Catalysts Group are planning U.S. factories to make diesel, gasoline and jet fuel from gas, which fell to a decade-low price this year. Their goal is to make motor fuels more cheaply and easily than oil-based products produced at giant refineries, and all within two years.

Gasoline prices in the United States have jumped more than 125 percent since the end of 2008 as crude doubled to more than $100 a barrel. At the same time, hydraulic fracturing processes, or fracking, helped gas producers unlock once inaccessible reserves in shale-rock formations. That's boosted output and driven down prices, sparking interest in using the surplus energy to fill fuel tanks.

"It's going to happen in North America," Roy Lipski, chief executive officer of Oxford, England-based Oxford Catalysts, said in an interview. Turning gas into liquid fuels "is the flip side of the coin to fracking for shale gas, because what are you going to do with all the gas?"

So-called gas-to-liquids technology has been proven on a larger scale, primarily at Royal Dutch Shell's plant in Qatar. Smaller production typically is targeted for areas producing gas that's "stranded," or unserved by pipelines. The economics depend on the feedstock staying relatively cheap.

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Oxford Catalysts is planning a factory in Pennsylvania, near the Marcellus Shale, that may go into production by the end of 2014, using a process known as Fischer-Tropsch after the German scientists who developed it in the 1920s. Germany commercialized the process in the 1930s to manufacture liquid fuel from domestic coal amid oil shortages before and during World War II.

The fuel accounted for about 95 percent of Germany's aviation gasoline during the Battle of Britain as Hitler's Messerschmitts faced Royal Air Force Spitfires in the early 1940s, Daniel Yergin, the chairman of IHS Cambridge Energy Research Associates, wrote in his Pulitzer Prize-winning 1991 book "The Prize."

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What I like about the gas to liquid process is that it allows vehicles to use existing infrastructure.  The fuel can be produced and sold at existing service stations, which could save thousands over costly conversions to run directly on natural gas. The price of the fuel would be substantially less than fuel made directly form oil.  It would probably be mixed with traditional fuel but should still be at a lower price once delivered.