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Big oil makes vast profits and the consumer gets buggered

Above image and text from an article dated 25 Nov 2011



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Gas to Liquids – the Hydrocarbons Mash | RBN Energy Network

There can be some confusion about how much natural gas is required to produce 1 bbl of liquid hydrocarbons. Dry natural gas is essentially 100% methane, with no heavier hydrocarbons, like ethane or propane, that can be recovered as ‘liquids’. As your readers can see from this article it takes about 9-10 thousand cubic feet of dry natural gas to produce 1 bbl of liquid hydrocarbons, in the form of diesel fuel, etc. So, 10 trillion cubic feet of dry natural gas is equivalent to about 1 billion barrels of liquid hydrocarbons.

Now, in the US natural gas is selling for somewhere between $2 – $3 per thousand cubic feet of dry natural gas. So, 10 thousand cubic feet of natural gas has a selling price of somewhere between $20 – $30. It costs about $5 to convert this gas into liquid hydrocarbons (plant operating costs), excluding costs associated with building a gas-to-liquids plant. So, it costs about $35/bbl max. (at current gas prices) to produce a ‘refined product’ that has a wholesale value well in excess of $100 bbl.

Now, in Qatar the natural gas that is processed through Shell’s Pearl plant also produces about 1 bbl of associated heavier liquids that are removed before the methane in processed into liquid hydrocarbons. So, Shell is getting about 2 bbl of liquids for every 10 thousand cubic of natural gas it runs through its plant. And remember, Shell gets the gas free, they just split the profits with their partner, the government. Shell is going to (supposedly) produce 250,000 bbl/day of liquids from that plant that are worth in excess of $100 bbl on the wholesale market. That is $25 million/day of refined product, half of which is Shell’s. Is it any wonder that Shell has readily spent $20 – $25 billion on it Qatar Pearl gas to liquids plant (Shell had to foot the bill for entire cost of the plant in return for getting the gas free)?

These conversion numbers will also tell your readers that the 350 plus TCF of proven natural gas reserves in the US are equivalent to about 35 billion bbls of refined diesel fuel. That exceeds proven oil reserves in the US. That is about $3.5 trillion worth of diesel. However, when sold as liquefied natural gas that 350 TCF only has a well head value of about $1 trillion.

So, why would the US let its natural gas be exported when it has a much greater value when converted to liquid product in the US??

Maybe the oil companies will export the ‘cheap’ product, process it into liquids overseas, and then sell those liquids back to US consumers for three times what the payed for it, a huge profit that is not taxable in the US.

Isn’t US energy policy (or the lack of one) interesting. Big oil makes vast profits and the consumer gets buggered.

The following links are articles concerning oil industry plans to construct gas to liquids plants in the US and elsewhere. Your readers might find this interesting reading.

Gas to liquids: Revolution in US shale brightens hopes for GTL – FT …

Sasol to build the first gas-to-liquids plant in the US

Shell’s Major Shift to Natural Gas, US Gas-to-Liquids Plant …

Shell Considers Building Gas-to-Diesel Plant in Louisiana –

Turning natural gas into diesel fuel – May. 9, 2012

Gas to liquids technology worldwide

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