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Bloomberg: Japan Aims to Beat Shell, Sasol With GTL Technology (Update1)

By Megumi Yamanaka

Oct. 4 (Bloomberg) — Inpex Holdings Inc. and five other Japanese companies are joining to develop gas-to-liquids technology, aiming to cut plant building costs and enabling them to beat GTL front-runners Royal Dutch Shell Plc and Sasol Ltd.

The Japanese companies will build a demonstration plant and develop gas-to-liquids capability by the end of the five years ending March 2011, they said in a statement today. The partners want to make the technology to build commercial plants available in 2012.

Japan, which imports almost all of its oil, wants to develop technology to rival Shell and Sasol, which plan GTL projects in countries including Qatar, owner of the world’s largest natural gas fields. Rising oil prices and environmental concerns have increased the incentive for companies to convert natural gas into diesel and other fuels with lower sulfur content.

The Japanese technology “could be about 10 percent cheaper” than current gas-to-liquids plants, Ikutoshi Matsumura, a managing director at Nippon Oil Corp., one of the project partners, said in Tokyo today. “We need to be more competitive than Shell and Sasol.”

The partners, including Japan Petroleum Exploration Co., Cosmo Oil Co., Nippon Steel Engineering Co., and Chiyoda Corp., are investing 12 billion yen ($102 million) in the project. Japan Oil, Gas and Metals National Corp., a state-run energy researcher known as Jogmec, is providing 24 billion yen, or about two-thirds of the costs including outlays to build the demonstration plant.

Indonesian Gas

Any of the six Japanese companies are entitled to use the technology to build plants overseas, using natural gas from fields where the companies hold stakes, Inpex’s Managing Director Kunio Kanamori said.

Inpex is studying the possibility of building a gas-to- liquid plant tapping Indonesia’s deepwater Abadi Structure in the Masela Block lying in the Timor Sea, along with a possible liquefied natural gas plant, the company said on its Web site.

“There are no specific plans we have at this moment for applying the gas-to-liquid technology,” Kanamori said. “Gas that is feasible for our technology is available in Indonesia and Thailand.”

Gas-to-liquids plants using the Japanese technology can process gas with carbon dioxide content as high as 40 percent, higher than the level feasible for LNG conversion, Kanamori said.

Sasol, Shell

“There are many discovered but untapped fields, and these can be used for gas to liquid,” Kanamori said.

LNG is gas that is chilled to liquid form for transportation by ship. The fuel is then converted back to natural gas for distribution to customers.

Sasol, the world’s biggest producer of motor fuel from coal, delayed output of oil products from natural gas at a plant in Qatar after a technical failure, the Johannesburg-based company said last month. The first products from the $1 billion Oryx gas- to-liquids plant, built in partnership with state-owned Qatar Petroleum will likely be produced in the fourth quarter of 2006 and be ready for market by the first quarter of 2007, Sasol said.

The company initially planned to start selling the plant’s products in the fourth quarter of this year.

Royal Dutch Shell Plc, Europe’s largest oil company, said in July it had made a final investment decision to press ahead with the Pearl GTL plant, also in Qatar. Company documents show the project’s costs would range between $12 billion and $18 billion, compared with an estimate of about $6 billion given earlier this year by Qatari Energy Minister Abdullah bin Hamad al-Attiyah.

Shell, Chevron Corp. and Statoil ASA have pre- qualified as bidders to help Algeria develop the Tinrhert GTL plant.

To contact the reporter on this story: Megumi Yamanaka in Tokyo at [email protected] .

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