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PROCEEDINGS, ASCOPE'97 CONFERENCE

NOVEMBER 24-27, 1997

Is LNG Still Competitive with Other Liquid Fuels?

Greenwood

Abstract

For utilization of the natural gas available at the remote site or in the deep sea as fuel gas for power station and/or home fuel, LNG has been
successfully applied as transportation measure for its utilization. Several alternative measures which convert the gas to liquid fuel, such as Fischer-
Tropsch conversion, methanol synthesis, dimethyl ether synthesis, etc. have been evaluated, and some of them have already been implemented.
Recently several projects are trying to find out the more detailed feasibility for these alternatives.

In order to cope the emerging energy demand in Asia, this paper examined the fuel cost at the consumers for these alternative measures compared
with LNG. The comparison was made for transportation distance and feed gas cost which would have a significant sensitivity especially for
Dimethyl Ether (DME)

1. Introduction

The energy demand of Asia APEC is increasing rapidly according to the recent economical growth with industrialization and urbanization. The
natural gas resource is a favorable energy in order to minimize the SOx, NOx emission and to minimize the CO2 emission from ecological view
point.

However this region has not enough natural gas resources inside the region and the transportation from the remote middle east will be a important
theme to cope the rapid economical growth. Historically, there are two transportation measures for natural gas transportation;

LNG

Pipeline

These measures have been successfully applied for the transportation of the natural gas. The pipeline has been successfully built in North American
Continent and Europe, while the LNG has been successfully applied between:

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Algeria - Europe

Alaska - Japan

South East Asia - Far East

Middle East - Japan

Australia -Japan

The LNG is applied for transportation of a long distance and/or the deep sea which is uneconomical and/or a hurdle for the pipeline construction.
Recently, several ideas have been introduced for the transportation by liquid form in international conferences;

Conversion of natural gas into syncrude, middle distillate ( Fischer-Tropsch)

Methanol

Dimethyl Ether (DME)

From view point of supply energy, this paper reviews the feasibility of liquid fuel which converted from natural gas, especially for DME in
comparison with LNG for variation of;

Distance

Capacity

2. Energy Demand in Asia

2.1 Natural Gas Supply and Demand in Asia APEC

In accordance with the energy demand forecasted by Japanese MITI based on the assumed economic growth rate, the region will need 3.0 billion
TOE, (ton oil equivalent) in 2010 for primary energy.(ref. -1) There will be many discussions for how will be the composition of the energy source
for the primary energy. Following five energy source will be the source for the primary energy.

Oil

Natural Gas

Coal

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Nuclear

Hydro-Electric

Based on BP Statistics, the share of natural gas in the primary energy consumption is 23 % for world and OECD in 1996.(ref. -2)

Oil Natural Gas Coal Nuclear Hydro-Electric

World 40% 23% 27% 7% 3%

OECD 43% 23% 21% 11% 2%

The region will require to introduce around 300 to 600MTA, (metric ton annum ) of natural gas. It will be obvious that the demand can not be
supplied from only inside the region. The area will need to import from giant natural gas resource in middle east and/or west Siberia, listed in Table
2.1

Other than Asia APEC, India also has rapid economical growth and the demand of natural gas in 2005 is estimated as 7 bcfd, billion standard cubic
foot per day.(ref.-3) Recent economical growth of India will need 10,000-12,000 mW/year installation of power plant to next decade.(ref.-4)

2.2 LNG for Power Generation

The big LNG importer of Asia use the LNG predominantly as fuel of power generation. Considering the emerging energy demand especially for
power generation, the LNG alternate must be fit to power generation.

Country reference
Power Generation Share in Natural Gas Consumption , %

Japan 70 ref. -5

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Korea 55 ref. -5

Taiwan 40 ref. -6

3. Screening of Gas to Liquid Technology

3.1 Fischer-Tropsch Synthesis

The Fischer-Tropsch Synthesis technology originally developed during World War II in Germany. Sasol and Shell have been successfully producing
liquid fuel from synthesis gas from coal and/or natural gas. Exxon has developed AGC-21 and is ready to built a commercial plant.

Sasol

Sasol has successfully produced liquid fuel from synthesis gas derived from coal since 1955 using circulating fluidized bed reactor. Sasol has
developed a slurry bed reactor which can scale up to 14,000 bbl/d and Sasol has been producing 2,500 bbl/d of liquids at a plant that began
operation at its Sasolburg complex in May 1993. South Africa currently consumes about 450,000 bbl/d of liquid fuels, of which net imports amount
to 255,000 bbl/d. The remaining 195,000 bbl/d are manufactured from coal by Sasol and from natural gas by state-owned Mossgas. Sasol provided
technology for Mossgas natural gas-to-synthetic fuel plant in South Africa, which began operations in 1993. (ref. -7)

Sasol says;

The products will fetch at least conventional fuel prices, and potentially also some premium due to their environmental advantages. At crude oil
prices in the $16-18/bbl range, the product prices are expected to lie in the $22-25/bbl range. At these prices, the pre-tax return on investment is
between 12-15%. For multiple modules the return on investment will increase due to the advantage of economy of scale.

Although, South Africa government provide a subsidy for Sasol to compete international oil market.

Sasol, QGPC and Phillips have signed a memorandum of understanding for a feasibility study of a proposed joint venture for a gas to liquid project
in Qatar. it would be located in Ras Laffan Industrial City in northern Qatar. The plant would produce approximately 20,000 barrels per day of
distillates and naphtha and be scheduled for start-up in 2002. The project would draw its natural gas feedstock from Qatar`s extensive reserves.
(ref.-8, ref.-9, ref.-10, ref.-11)

Shell's SMDS

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The Shell Middle Distillate Synthesis (SMDS) process was applied to the Bintulu plant at a capital cost of $850 million. The plant converts
100mmscfed of natural gas to 12,000 bbl/d of product ranging from naphtha to paraffinic waxes. The plant went on stream in May 1993. The plant
takes 2.5 metric tons/day of oxygen from an on-site plant. Because the Bintulu SMDS plant is small and comparatively uneconomic in comparison
with conventional middle distillates production, Shell decided to target specialized, high-return wax markets. Middle distillates from Bintulu are
used by Shell and by customers, particularly in California, to add to their diesel fuels to bring them into compliance with stringent emissions
regulations. (ref.-8, ref.-12)

Exxon's AGC-21

Exxon has developed its Advanced Gas Conversion Technology 21st Century (AGC-21) process to the point where it was running a 200 bbl/d GTL
, Gas to Liquid, pilot plant at Baton Rouge. The company unveiled its process in announcing negotiations with Qatar General Petroleum Corp.
(QGPC) to build a GTL plant to utilize some of the gas in North field. The Exxon plan is to build a plant to convert 500 mmscfd -1 bscfd of natural
gas to 50,000-100,000 bbl/d of middle distillates, naphtha, and catalytic cracker feedstock.

The AGC-21 process has been developed to the point where scaling up to commercial plant size is within reach, although Exxon said go-ahead for
the scheme is conditional on gas prices and a satisfactory fiscal regime. The Qatar project is expected to cost $1.2-2.4 billion, which equates to
about $24,000/bbl/d of output. This is well below the $30,000/bbl/d cost reckoned to be the break-even point for GTL at current oil prices. (ref.-8,
ref.-13)

Syntroleum

Syntroleum Corp., Tulsa, Okla., which has developed a gas-to-liquids took out its first patents in 1989 and the following year built a 2 bbl/d pilot
plant that is used to test catalyst performance, reactor designs, and operating procedures. The company is licensing the technology to petroleum
majors.

Considering above, the Fischer-Tropsch synthesis would be economical when the crude oil price over 20-25 $/bbl in future. The Fischer-Tropsch
Synthesis basically produce syncrude and not so adequate as LNG as the fuel gas of the gas turbine, which promise high thermal efficiency and
high availability.

3.2 Methanol from Natural Gas

As an alternate to LNG, two decades ago, there were several comparison studies.

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LNG Methanol

Plant Cost Base expensive

Plant Thermal Efficiency Base low

Tanker Cost Base inexpensive

Receiving Cost Base inexpensive

The paper of 4th International Conference on Liquefied Natural Gas said that the methanol will be more economical for the transportation distance
over 6,000 nautical miles(11,000km) for the feed natural gas cost of 50 cents/mmbtu.(ref.-14) If the study is reviewed based on current cost basis,
the break even distance might be changed. GE has already tested methanol as fuel of gas turbine, although there has never been such application.
Since the methanol is toxic material and soluble to water, the methanol spill from tanker accident will need to be assessed. The demand for power
generation use will far increase over current international trade by tanker resulting the spill chance will far increase. Methanol will be economical
when the feed gas cost is inexpensive since the thermal efficiency is lower than LNG and DME, although the transportation cost and receiving
terminal cost are much less than those of LNG and DME. Therefore methanol as LNG alternate looks unlikely for future high feed gas cost .

3.3 Dimethyl Ether, DME

Recently, DME is focused as a new alternative diesel fuel. DME is today predominantly used as an aerosol propellant due to its environmentally
benign characteristics. It is not harmful to the ozone layer as the previously used CFC gases were. DME is also virtually non toxic and is easily
degraded in the troposphere. It can be seen that the stringent 1998 Californian ULEV regulations can be met by using DME as fuel. Dimethyl ether
is a colourless gas (b.p. = -24.9°C) with a faint ethereal fragrance. The vapor pressure at ambient temperature is about 5 bar which makes DME
similar to LPG with respect to physical properties. It is relatively inert, non-corrosive, non-carcinogenic unlike e.g. diethyl ether, DME does not
form peroxides by prolonged exposure to air. (ref.-15) Basic chemical and physical properties are listed in Table 3.1

DME has a heating value, which is lower than diesels (approx. 42.5 MJ/kg) and LNG(approx. 50 MJ/kg) but higher than methanol (19.7 MJ/kg). Its
vapor pressure is intermediate between propane and butane, so it can be handled as LPG but due care is needed in selection of materials for gaskets,
etc. Therefore this fuel is suitable to modern gas turbine power generator. The thermal efficiency of the process is higher than methanol by 5 to
10%. And the combined cycle will perform high thermal efficiency of over 55% as well as LNG using GE's modern FA technology.

Therefore, the DME was selected as alternate to LNG for this paper.

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Synthesis of DME

In view of DME's potential of becoming an alternative LNG it is, of course, highly relevant to consider how DME can be produced in very large
quantities in order to meet the demand. DME is currently produced by fixed bed catalytic dehydration of methanol.

In large scale manufacture, however, there are significant advantages in combining the methanol and DME synthesis by integration of the two
process steps into one single process for the conversion of synthesis gas directly into DME. The advantages obtained by combined synthesis of
DME and methanol can be appreciated by thermodynamic considerations: The direct synthesis of from synthesis gas involves three reactions (heat
of reaction given in kJ/mol in parentheses):

CO2+ 3 H2 = CH3OH + H2O (50.1) (1)

H2O + CO = H2 + CO2 (40.9) (2)

2 CH3OH = CH3OCH3 + H2O (23.4) (3)

In order to utilize the full advantages provided by thermodynamics, all three reactions must take place simultaneously. The simplest way to achieve
this would be to apply a physical mixture of classical methanol and DME catalysts. However, such a solution could create problems with regard to
selectivity, particularly at high temperature which could lead to excessive formation of byproducts, mainly higher alcohols and hydrocarbons. Due
to the strong exothermicity of the overall reaction, the ideal catalyst must exhibit high stability and preserve high selectivity at high temperature

By Haldor Topsoe, catalysts with such properties have already been successfully developed designed specifically for application in acetyls
manufacture in which high selectivity is of the utmost importance. (ref.-15)

The block flow diagram is shown in Fig. 3.1

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4. Cost Estimate

The transportation costs for LNG case and DME case were reviewed based on appropriate assumption described herewith.

4.1 Cost Estimate Basis

Distance to Transport

To import the enormous amount of natural gas, the Middle East will be a major supplier of natural gas to East Asia. Therefore the maximum
transport distance was taken as 12,000km. The minimum transport distance was taken as 2,000km.

Exporter Importer Distance, km

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Alaska Japan 5,250

Brunei Japan 3,840

Algeria France 640

Algeria United States, Boston 5,600

Abu Dhabi Japan 11,000

E. Kalimantan Japan 5,900

W. Australia Japan 8,000

Eventually, the distances were taken as; 2000, 6000, 12000km,respectively.

Capacity of LNG Plant

Based on recent large train capacity as 3.3MTA of Oman LNG (ref.-16), the plant capacity was taken as 3.2MTA x 2trains. The maximum capacity
was taken as around 20 MTA which is similar to Badak LNG which will have 8 trains of around 2.5 MTA (ref.-17). Over this capacity, it will be
difficult from view point of safety and security.

Therefore the different project will cope with the demand under this capacity.

Nominal capacity, MTA: 6, 12, 18 which need feed gas of 1,100, 2,200, 3,300 mmscfd respectively

Capacity of DME Plant

To compare with LNG based on same condition, the capacity has been taken as equivalent to LNG capacity in product heating value.

The train capacity was taken as 5, 200 t/d which is LNG equivalent 1.0 MTA which will cope with a single large oxygen plant. Nominal capacity,
LNG equivalent MTA: 6, 12, 18 which need feed gas of 1,250, 2,500, 3,750 mmscfd respectively.

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Feed Gas Condition and Composition

Feed gas pressure: 65 bar

The composition was taken as follows;

mol. %

N2 0.5

C1 92.5

C2 6

C3 1

CO2 < 1000ppm

Mol. Wt: 17.23

HHV, 1065 btu/scf

LHV, 961 btu/scf

Economic Factor

The economic factor was taken as follows;

Feed Gas Cost(Well Head), $/mmbtu: 0.5

Fixed Charge Factor, %: 15 note*1

The plant export electric power to outside : 2cents/kwh.

Operating and Maintenance cost excl. Fuel, % of Investment;

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Tanker 4.5%

Plant 4%

note*1 the factor is equivalent to 12% of IRR, Internal Rate of Return for the construction period of 5 years for the investment schedule of
5,15,30,30,20%

Performance of LNG Plant and DME Plant

Plant LNG DME

Operating Factor 0.9 0.9

Fuel Consumption, % of Feed Gas 10 29

Loading Loss, % of Feed Gas 1 None

Power Export None Yes

Performance of LNG Tanker

Transport Fluid LNG DME

LNG Tanker Size, m3 135,000 135,000

BOG rate, % per day 0.15 Recover

Service Speed: knots 18.5 16

4.2 Dimethyl Ether Plant Cost Estimate

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The dimethyl ether process is similar to methanol synthesis. There are significant advantages in combining methanol, water gas shift and DME
synthesis into one single step. The reforming of the natural gas for large capacity uses auto thermal reforming reaction, which has several merits
over the steam reforming, although oxygen plant is required. (ref.-15)

Compact design
Possible stoichiometric synthesis gas
high reformer pressure eliminating or reducing make up gas compression
No NOx emission
Low cost for large single train.

The process BL cost was estimated based methanol plant cost and the scaling factor listed in literature. (ref.-15). The methanol plant cost is
estimated based on SRI reports.(ref.-18) The power generator in the offsite/utility facility will supply the plant required power including process
BL, cooling water pumps, refrigeration power to cool the DME for the atmospheric storage tanks. And the excess power will be exported for
outside of the plant. The storage tank capacity will be around double size of the DME tanker. The off site facilities consists of ;

Cooling Water, Water Treatment, Steam Generation, Storage and Loading, Refrigeration, Power Generation & Power Export, General Service,
Flare System, Waste Water Treat, etc.. These cost was estimated base on Chiyoda`s in house data.

4.3 Cost Review Result

Based on above basis the project cost and the gas cost at consumer were estimated.

LNG project cost is shown in Table 4.1 and DME project cost is shown in Table 4.2. The LNG cost at consumer, i.e. outlet of LNG receiving
terminal is as follows;

Distance, km 2,000 6,000 12,000

6MTA, $/mmbtu 3.20 3.71 4.48
12MTA, $/mmbtu 2.75 3.25 4.00
18MTA, $/mmbtu 2.52 3.02 3.76

The DME cost at consumer, i.e. outlet of DME receiving terminal is as follows;

Distance, km 2,000 6,000 12,000

6MTA LNG eq., $/mmbtu 3.59 3.78 4.07

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12MTA LNG eq., $/mmbtu 3.05 3.23 3.49

18MTA LNG eq., $/mmbtu 2.78 2.96 3.21

The gas costs at consumer are shown in Fig. 4.1.

The figure shows that ;

- for long distance more than around 5,000-7,000 km, DME case will be less cost per mmbtu.

5. Discussion

The DME plant of such large capacity has never been built although the technology will be extrapolate on the current methanol technology.

The DME train capacity was taken as 5, 200 t/d which is equivalent to Methanol plant of 7,300 t/d in plant size. This capacity looks close to

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three(3) times of the current prevailing large size methanol plant.. If the train capacity is increased, the scale merit will result in more competitive
energy cost. It took around two decades for LNG to increase the train capacity up to three(3) times.

The DME project will need a big project investment similar to LNG project and will have some technical risk since such plant has never been exist.
Therefore detailed RAM(reliability, availability and maintenability) assessment will have a important role, although the project investor still have
some risk for the project implementation which eventually would result some cost up of DME cost at consumer. However, after the successful
operation of the whole DME chain, the DME will serve as fuel for power generation for the longer transportation distance. Moreover, in future if
the DME is used as alternate to diesel fuel for road transportation truck due to environmental reason, the DME project realization will have a strong
follow winds.

6. Conclusion

To cope with the rapid economical growth of Asia APEC, DME can serve as primary energy source as well as LNG. It will be obvious that the
DME will be economical for the long distance, since the LNG plant will require costly tanker and receiving terminal. The break even distance will
be around 5,000-7,000 km, and vary for the transportation volume. To realize the project, there will be some risk since there has never been such
capacity of DME plant, however recent technology can manage the risk to minimum.

Reference

1. T. Toichi, Asian Natural Gas VI, Singapore 1996

2. BP Statistical Review of World Energy, 1996

3. World Gas Intelligence Oct. 27 1995

4. R. P. Sharama, 2nd Doha Conference on Natural gas, 1997

5. Y. J. Kwan, 2nd Doha Conference on Natural gas, 1997

6. H. C. Chang, 2nd Doha Conference on Natural gas, 1997

7. D. Knott, Oil & Gas J. Jan. 10, 1997

8. News, Oil & Gas J. Jan. 10, 1997

9. Project News 1997(Japanese Magazine)

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10. B. Jager, Paper No. FRT1-03 World Gas Conference 1997

11 News, Phillips Petroleum Home Page.

12. J. Jacometti, Paper No. FRT1-02 World Gas Conference 1997

13. B. Eisenberg, et. al. 73rd Annual GPA Convention 1994

14. P. Soedjant, et. al. 4th International Conference on Liquefied Natural Gas, 1974

15. J. B. Hansen, et. al., SAE Paper 950063, 1995

16. The LNG Observer, Winter 1995-1996

17. The LNG Observer, Fall 1995

18. SRI Project 3978-10, Global Outlook for Oxygenates 1990-2000, 1992

19. LNG Observer Winter 1996

Table 2.1 Giant Gas Field

Field Country Ultimate Gas Reserve, TCF

1 Urengoy C.I.S. (W. Siberia) 176.5

2 Kangan Iran 170.0

3 Yamburgskoye C.I.S. (W. Siberia) 155.3

4 N-W Dome Oatar 100.6+

5 Zapolyarnoye C.I.S. (W. Siberia) 94.0

6 Krasniy Kholm C.I.S. (Orenburg) 74.0

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7 Hassi R'Mel Algeria 70.0

8 Hugoton- USA (Kansas- 70.0

Panhandle Texas)

9 Kangan Iran 70.0

10 Groningen Netherlands 60.9

11 Medvezhye C.I.S. (W. Siberia) 55.0

12 Bovanenko C.I.S. (W. Siberia) 53.0

13 Pars Iran 50.0

14 Pazanan Iran 50.0

15 Kharsavey C.I.S. (W. Siberia) 42.4

16 Taz C.I.S. (W. Siberia) 40.4

17 Dorra Neutral Zone 35.0

18 Bahrain Bahrain 20.0

19 Kangiran Iran 20.0

20 Semakoyskoye C.I.S. (W. Siberia) 19.0

Table 2.2 LNG Project List (ref. -19)

Project Name Capacity, MTA Remarks

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Alaska,Kenai 1.5 -

Algeria, Camel 1.1 -

Algeria, Skikda 5.8 -

Algeria, Arzew, GLZ1 7.8 -

Algeria, Arzew, GLZ2 7.8 -

Libya, Marsa El Brega 2.6 -

Nigeria, Bonny 5.9 Expected start up 1999

Abu Dhabi, Das Is. 4.3 -

Qatar, Ras Laffan 6.0 3rd train is under Constr.

Oman, Al Ghalilah 6.6 Expected start up 1999

Indonesia, Arun 9.0 -

Indonesia, Bontang 13.2 Train G is under Constr.

Malaysia, Sarawak 15.0 -

Brunei, Rumut 5.3 -

Australia, NWS 6.0 -

Table 3.1 Properties of Dimethvl Ether, DME

Chemical formula CH3OCH3

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Molar weight 46.07

Melting point, °C - 138.5

Boiling point, °C -24.9

Critical temperature, °C 127

Critical pressure, bar 53.7

Density of liquid, kg/l, * 0.67

Density of liquid@ -24.9-C kg/l 0.73

Vapor pressure, bar, * 5.1

Heat of combustion, gas/ MJ/kg 28.84

Heat of vapourization, kJ/kg, ** 410

Autoignition temperature, -C 235

Explosion limits, fur, vol% 3-17

* at 20 deg. C

** at -20 deg. C

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