Velocys plc announced—following Shell’s cancellation of a proposed 140,000 barrel (bbl.) per day gas-to-liquids (GTL) project on the Gulf Coast—that small-scale GTL makes far more economic sense.
The decision by Shell to scrap the project “due to cost considerations illustrates the problems of planning a mega-scale project,” according to Velocys. The British firm specializes in GTL systems.
“The extremely long lead times in constructing such a project—up to five years from final investment decision (FID), which itself was several years away—meant that it was unlikely to come on stream until well into the 2020s.
“Shell also commented that with three mega-projects planned in North America, including a 96,000 bbl. per day GTL plant by Sasol, it would be virtually impossible to find enough engineers and project managers to run all three projects simultaneously,” Velocys said. In contrast, small-scale GTL requires far less capital and far less time to start up, according to the company.
“Instead of the $20 billion estimated capital cost for Shell’s mega-scale plant,” smallscale GTL projects of 2,500 bbl. per day would cost only about $250 million, according to Velocys, “roughly $100,000 for every daily barrel of installed capacity.”
What’s more, “smaller-scale GTL plants can be creating high-value product within as little as two years after FID, therefore reaping the benefits of the [North American] shale gas boom and the price arbitrage more quickly and for a longer period of time,” according to Velocys.
In addition, small-scale GTL plants “will be deployed on smaller fields, at more locations, by a wider range of developers, alleviating the challenge of securing massive quantities of gas on long term contracts.”
Such small-scale plants “have less risk of cost overruns and delays, and will be easier to permit, supply and operate” while “the modular construction means that smaller scale GTL facilities can be deployed at remote locations and/or integrated with existing facilities, improving plant economics,” according to the company.
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