IBP1053_19

GTL AS AN OPTION FOR MONETIZING THE

NATURAL GAS FROM PRE-SALT
Marcelo F. Alfradique1, Cláudia M. C. Bonelli2,
Gabriel F. Costa3, Rafael R. Ferreira4

Copyright 2019, Brazilian Petroleum, Gas and Biofuels Institute - IBP

This Technical Paper was prepared for presentation at the Rio Pipeline Conference and Exhibition 2019, held
between 03 and 05 of September, in Rio de Janeiro. This Technical Paper was selected for presentation by the
Technical Committee of the event according to the information contained in the final paper submitted by the
author(s). The organizers are not supposed to translate or correct the submitted papers. The material as it is
presented, does not necessarily represent Brazilian Petroleum, Gas and Biofuels Institute’ opinion, or that of its
Members or Representatives. Authors consent to the publication of this Technical Paper in the Rio Pipeline
Conference and Exhibition 2019.

Abstract

An steady increase in the national oil and natural gas production is expected in the next 10
years, coming mainly from the pre-salt area. On the other hand, it is estimated that Brazil will
still be a net importer of high volumes of liquid fuels in this horizon, mainly petrochemical
naphtha and diesel oil. These volumes could be lower if part of the natural gas produced was
directed to onshore gas-to-liquids (GTL) plants or floating platforms for offshore natural gas
production allied to this technology, called Floating Gas-to-Liquids (FGTL). These
technologies could be studied as an option for monetizing the natural gas from pre-salt, either
in the offshore environment or after the outflow to the coast, in line with the Brazilian liquid
fuel balance forecast in the coming years or being sold in global markets. Therefore, the present
work aims to study the state of the art of GTL and FGTL technologies, analyzing the costs
involved in each one and its applicability to the Brazilian case. Considering the LPG, naphtha
and diesel prices in the global market, it is estimated that the onshore GTL plant should obtain
natural gas at a maximum price of US$ 4.65 /MMBtu to make the project feasible. For offshore
GTL, the maximum natural gas price would be approximately US$ 3.67 /MMBtu. These should
be the prices of treated natural gas for onshore or offshore GTL plants to be feasible, which
could be higher if a bonus is paid over GTL products, in face of their higher purity.

Keywords: Floating gas-to-liquids. Pre-salt. Liquid Fuels.

1. Introduction

Brazil's gross natural gas production will roughly double from 2017 to 2027. Most of
this contribution will come from the pre-salt fields (66% in 2027), according to EPE (2018a).
It should be noted that gas injection rates are considered high in the pre-salt, totaling 49.8% of
the gross production from this exploratory area. Petroleum production, on the other hand, will
increase by 96%, with pre-salt accounting for 78% in 2027. However, even with this increase
in oil production, it is estimated that Brazil will continue to be a net importer of high volumes
of fuels, mainly naphtha (18,000 m³ / day in 2027) and diesel oil (36,000 m³ / day in 2027).
______________________________
1
DSc. Chemical Engineer – Empresa de Pesquisa Energética (EPE)
2
DSc. Chemical Engineer – Empresa de Pesquisa Energética (EPE)
3
Chemical Engineer – Empresa de Pesquisa Energética (EPE)
4
Trainee – Empresa de Pesquisa Energética (EPE)
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Gas-to-Liquids (GTL) technology was developed during World War II as an alternative

to export large quantities of natural gas in the form of liquid fuels, which are easier to transport
and lower shipping cost than natural gas. Currently, there are several plants of onshore GTL in
the world. The technology consists of the production of synthesis gas through the steam
reforming of natural gas, followed by a Fischer-Tropsch reaction using catalysts to generate
various types of liquids, such as naphtha and diesel, as well as LPG, and kerosene. More
recently, the technology has been revisited to be used on offshore platforms, being called
Floating Gas-to-Liquids (FGTL), appropriate to offshore natural gas fields. However, although
onshore technology is already well established, there are still no FGTL facilities in the world.
Therefore, the present work aims to study the state of the art of GTL and FGTL
technologies, analyzing the costs involved in each one and its applicability to the Brazilian case.
FGTL technology was studied as an option for monetization of pre-salt natural gas, in line with
the liquid fuel balance forecast for Brazil in the coming years or even being sold in the
international market. Consequently, the import volumes of liquid fuels could be reduced, as
well as the pre-salt gas injection and flare gas burning.

2. Methodology

The present work is divided into two parts: the first presents an analysis of the GTL
technologies in the world, addressing their characteristics, technical aspects and necessary
adaptations for the implementation of the FGTL technology in the offshore environment, while
the second presents a case study regarding the evaluation of the economic viability of a FGTL
facility for monetization of pre-salt natural gas.

2.1. FGTL Technology Implementation Analysis

At present, the four largest GTL plants in operation in the world, all onshore, are located
in Qatar, South Africa and Nigeria, as shown in Table 1.
Table 1. Major onshore GTL plants in the world.

Plant Capacity1 (bbl/d) Location Operator

Pearl GTL 140,000 Catar Shell
Oryx GTL 32,400 Catar Qatar Petroleum / Sasol
Mossel Bay GTL 30,000 South Africa PetroSA
Escravos GTL 33,000 Nigeria Chevron
¹ Liquid fuels production capacity
Source: EPE, based on BROWN (2013), SOLOMONS (2014) and EIA (2017).

GTL process technology features the following steps: reforming1 natural gas into
synthesis gas (syngas), a mixture of CO and H2; converting the synthesis gas into long chain
hydrocarbons by the Fischer-Tropsch process; and conversion of the liquid product (synthetic
crude oil or syncrude) into fuels and/or petrochemicals, according to the refining plant
configuration and the selectivity preference. In this last step, the objective is to decompose these
long-chain hydrocarbons into smaller molecules in the desired range, such as naphtha, diesel
oil, kinds of paraffin, among others (MARYLAND, 2018; KIM, 2014; ETIM, 2007). Figure 1
represents a GTL process technology scheme.

1
Chemical reaction of natural gas with water vapor and CO2, additionally to partial oxidation reactions in order to
obtain syngas.

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Syngas Diesel
Natural Gas Syncrude
Natural Gas Fischer-Tropsch Product Naphtha
Reforming Process Upgrading Kerosene
(O2, CO2) (H2, CO)
LPG

Figure 1. GTL process scheme.

Source: EPE, based on KIM et al. (2014) e ETIM (2007)

This same technology could be also applied in an offshore environment, called FGTL,
appropriate to offshore natural gas fields, such as fields located in the pre-salt area, although it
has not yet been applied commercially. The main advantage of using FGTL for the monetization
of natural gas is the possibility of using existing structures for handling and use of the products,
which can also be treated by conventional methods already known in the industry. For example,
it is possible to transport them by conventional ships and pipelines, already installed or not
(CASTELO BRANCO, 2008).
Regarding the technical issues involved in adapting the technology for offshore use, the
most relevant factors, according to KIM (2013), are: the required robustness of ships in the
marine environment; the space required for installation of the equipment on the hull, mainly for
large capacities of GTL; the height limits for shipping distillation towers (preferably up to 30
meters) due to the impact on the moment of inertia of the vessels; the necessary spatial
separation between oxidation equipment and fuel tanks for safety and other factors relating to
the adaptation of plants to the marine environment, such as the required dynamic stability of
the equipment.

2.2. Case Study

Figure 2 shows the pre-salt natural gas monetization model using FGTL technology by
generating diesel, naphtha, LPG or kerosene from the conversion of natural gas produced in a
hypothetical field. This field would be located in the southeast region of the country at a distance
of approximately 250 km from the coast, which is estimated average value for the pre-salt fields
located in the Santos Basin, near the coast of São Paulo.
The petrochemicals generated from the FGTL process could be transported via a relief
vessel to storage tanks and then offered on the domestic market and, in the case of surplus
volume, it could be exported to the international market. Another possibility for the application
of this technology would be the production of bunker fuels with sulfur content below 10 ppm
(GLEBOVA, 2013), generating fuels that comply with specifications of the International
Maritime Organization (IMO) that will come into force in 2020. This base case study was
compared to an onshore GTL plant, to also produce petrochemicals to be offered in the domestic
market.
The economic viability of the FGTL and onshore GTL projects were evaluated, with a
15-year project time, 3 of which were construction. In this stage, the minimum price of treated
natural gas, before liquefaction, in dollars per million Btu (US$/MMBtu) was estimated. This
price could be an internal transfer price of the natural gas stream between the fractionation
module and the E&P company's liquefaction module that will implement the FGTL installation
on its own platform or else the selling price to another company. This benchmark for price
analysis was chosen because the activities prior to it (from well to fractionation) are common
among the many offshore natural gas monetization alternatives. The subsequent activities vary
according to the chosen alternative. Figure 3 shows a monetization scheme for pre-salt gas,
including the FGTL model, which consists of the offshore gas-to-liquids process for the
production of LPG, diesel, naphtha, and kerosene.

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Onshore Offshore
Diesel, Naphtha,
LGP and Kerosene to
domestic market

Storing
Diesel, Naphtha, LPG
and Kerosene to the
international market

Onshore
GTL Plant Tank Ship

Bunker Fuels with FGTL

Low-Sulfur content
Hypothetical
pre-salt field

Figure 2. Monetization alternatives via FGTL

Source: EPE

Figure 3. Diagram of monetization alternatives for pre-salt natural gas

Source: EPE

The technical and economic assumptions adopted in the case study are described below:

i. Onshore GTL and FGTL plants capacity

The capacities of the onshore GTL and FGTL plants were estimated at 19,680 bbl/day,
calculated from the capacity of 5.57 million m³/day of associated natural gas, corresponding to
the approximate production of pre-salt basin fields (EPE, 2019). The conversion rate used to
calculate these capacities was 283 m³ of natural gas/barrel syncrude (GLEBOVA, 2013).

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ii. Investment and Operation Costs

For an onshore GTL plant, the CAPEX and OPEX estimations were obtained from 6
theoretical onshore GTL projects, according to GLEBOVA (2013) and ETIM (2007). To adjust
these costs to the capacity of this case study, a CAPEX estimate of each project was corrected
according to the equation below, using a scale factor, quoted in EPE (2018b):
𝑠𝑐𝑎𝑙𝑒 𝑓𝑎𝑐𝑡𝑜𝑟
𝑆𝑡𝑢𝑑𝑦 𝐶𝑎𝑠𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦
CAPEXStudy Case = CAPEXTheorical GTL Plant ∗ ( 𝑇ℎ𝑒𝑜𝑟𝑒𝑡𝑖𝑐𝑎𝑙 𝐺𝑇𝐿 𝑃𝑙𝑎𝑛𝑡)

In this case, a scale factor of 0.65, commonly used for chemical installations in GTL
projects (GLEBOVA, 2013), was adopted. Table 2 illustrates the CAPEX and OPEX estimation
of the 6 theoretical GTL projects, along with their adjusted CAPEX values:
Table 2. Investment and Operation Costs estimation for theoretical onshore GTL plants.

Onshore GTL CAPEX - Adjusted OPEX

Project (US$ mi) (% CAPEX/year)
Project 1 394 7.2%
Project 2 663 9.1%
Project 3 778 9.2%
Project 4 890 5.4%
Project 5 594 4.2%
Project 6 396 5.8%

Source: EPE, based on ETIM (2007) e GLEBOVA (2013)

The CAPEX value adopted in this case study was calculated using the average of the
total adjusted total CAPEX values, resulting on a value of US$ 619 million, while the OPEX
adopted also was calculated from the average values of OPEX, obtaining the value of 6.8% of
CAPEX/year.
For the FGTL plant, cost estimates were made using a cost correction factor, called
marinization factor, which allows the adaptation of onshore GTL costs to maritime
environments, intensifying factors related to CAPEX and OPEX. ETIM (2007) estimated the
costs associated with process marinization and concluded that a GTL plant represents about
70% of the total costs of an FGTL for both CAPEX and OPEX. Therefore, the CAPEX of the
FGTL technology was calculated at US$ 805 million, while the calculated OPEX was at 8.8%
of CAPEX/year.

iv. Taxes and fees

The weighted average cost of capital (WACC) was adopted at 10% per year and the
Income Tax was set at 25% and the Social Contribution on Net Income (CSLL) at 9%. The
results obtained do not include Taxes on the Circulation of Goods and Services (ICMS), Social
Integration Programs (PIS) / Contribution for Social Security Financing (COFINS) and
Services Tax (ISS).

v. Product estimates and its market prices

In order to calculate the revenue obtained from the liquids for both case studies, the
composition of products generated by the GTL process was based on Oryx GTL, a plant in
operation (GLEBOVA, 2013). Sales prices were obtained from national data provided by ANP
(ANP, 2019a; ANP, 2019b), as shown in Table 3.
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Table 3. Estimates of the composition of onshore GTL plant products and their sales prices

Fraction Market Price2

Produkt
GTL onshore1 (US$/bbl)
Diesel ULSD 37.5% 82.39
Kerosene 37.5% 94.88
Nafta 20% 52.53
GLP 5% 28.41
1
Oryx plant composition of products
2
Market prices consulted from data provided by ANP

Source: EPE, based on ANP (2019a); ANP, (2019b), GLEBOVA, (2013).

3. Results and Discussion

Based on the mentioned information, cash flows for both case studies were determined
using a tool developed in the EPE, SAGTL (Gas-to-Liquids Facilities Cost Evaluation System).
Thus, it was possible to estimate the break-even of treated natural gas prices for the FGTL and
GTL onshore projects that turns the NPV in the amortization period equal to zero, considering
the established attractiveness rate (WACC). Figures 4 and 5 demonstrate the cash flows for the
GTL onshore and FGTL case studies, respectively.

100
50
Discounted Cash Flow (US$ mi)

0
-50
-100
-150
-200
-250
-300
-350
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Project Year

Figure 4. Discounted cash flow for the onshore GTL project.

Source: EPE.

Based on these cash flows, the break-even prices for natural gas treated - before the
liquefaction stage - were estimated at US$ 4.65 /MMBtu and US$ 3.67 /MMBtu for the onshore
GTL and FGTL case studies, respectively. This cost difference was expected since FGTL
facilities are CAPEX-intensive compared to an onshore option. Note that these values can
differ, as it is a feasibility study.
In addition, it is observed that the price of natural gas that economically allows the
FGTL strategy in offshore environment is compatible with the break-even price estimates for
the Brazilian pre-salt natural gas with CO2 content between 0 and 30%, which are located in

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the range of US$ 2.00 to US$ 7.00 /MMBtu for most cases, even after outflow to land and
processing in UPGNs, with liquids sale (EPE, 2019).
200

Discounted Cash Flow (US$ mi)

100

-100

-200

-300

-400

-500
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Project Year

Figure 5. Discounted cash flow for the FGTL project.

Source: EPE.

On the other hand, there are sensitivities (not considered in this case study) that open up
possibilities to intensify the FGTL’s break-even value for natural gas. The lifetime of an FGTL
unit can range between 25 and 30 years and given the possibility of moving the unit, it would
be possible to intensify the break-even rate if the amortization time were extended to the project
lifetime. Another possibility would be to seek agreements with the natural gas producer, since
this project proposes to use natural gas where its flow becomes costly, making it difficult to
monetize it, considering that the costs and the complexity of marine pipeline projects increase
considerably with the depth of the facility.
It is worth mentioning that burning and ventilation of natural gas represents a loss of
resources, and also an environmental risk due to CO2 emissions. Due to the burning and
ventilation limits of the associated natural gas, currently the preference of the producers to
choose to inject it in the basins to obtain advanced recovery of liquids and to maintain the
pressure of the reservoir. Injection may seem attractive at first but, in some cases, it may reduce
or hinder production either because its excess may harm the reservoir or because the high costs
for drilling and finishing the injector well may be significant in certain fields (CASTELO
BRANCO, 2008).
Thus, the FGTL shows up as an option for monetization of natural gas from the pre-salt
reserves, although there are still technical challenges inherent to its installation in such
environments. A challenge related to the installation of this technology in the pre-salt would
adapt to the rough environment of ultra-deep waters, where these basins are located. Many of
the GTL technologies rely on relatively high and cylindrical reactors, which can make their
installation in a challenging maritime environment (BAXTER, 2010).
In response to this situation, some companies are developing solutions called “small
scale GTL”, designed to operate on an existing FPSO unit. For example, we can mention the
case of compactGTL, which has the pilot plant in partnership with Petrobras, cited above. In
this case, unlike the assumptions adopted in this study, the goal is to produce only syncrude to
be drained by the common oil production. By eliminating the last step of the process
(upgrading), the final dimensions of the production module and the challenges of operation in
offshore environments are reduced. However, there is no commercial technology for the
construction of an offshore GTL plant yet.

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The FGTL plant should also be seen as an opportunity because it will allow the
production of differentiated and low sulfur petrochemicals, even considering the technical
challenges related to the installation of this technology to the deepwater environment where the
pre-salt fields are located, which have more severe meteo-oceanographic conditions.
Therefore, the economic viability of FGTL projects depends on several factors: the
profile of net currents produced; the prices that customers will be willing to pay for the products
and other external factors that cause the opportunity cost of treated natural gas reaches the value
of US$ 3.67/MMBtu.

4. Conclusions

Located in regions distant from the coast, pre-salt reserves are difficult to dispose of
natural gas through pipelines. In this context, the FGTL technology presents an opportunity to
monetize natural gas and the possibility of supplying the national demand of petrochemicals
such as diesel and naphtha, in addition produces fuels with high purity, reduced in content of
sulfur. For associated gas, there are cases where the gas injection in a certain basin reaches its
limit, making it a burden that could turn into profit from petrochemicals generated in the
process.
The case study demonstrated the economic viability of an FGTL project of a
hypothetical field of natural gas in the pre-salt environment of Brazil at a distance of
approximately 250 km from the coast and water depth of 2000 m, based on an onshore GTL
plant and conceptual marinization factor that adapt the technology to the offshore environment.
A maximum natural gas price of US$ 3.67 /MMBtu was estimated for this alternative
to be economically viable. In comparison to the FGTL, the break-even value of an onshore GTL
unit was also calculated and resulted in US$ 4.65 /MMBtu. These prices are compatible with
the break-even price estimates for Brazilian pre-salt natural gas with CO2 content between 0
and 30%, which can vary in the range of US$ 2.00 to US$ 7.00 /MMBtu for most cases, even
after outflowing to the ground, processing into UPGNs and liquid selling.
The presented economic analysis has some limitations, mainly regarding the estimates
of CAPEX and OPEX, which were based on concept screening level analyses. Given the
specificities of the projects, the estimates can range between negative 20% to 50% and positive
30% to 100% related to the reference case, according to AACE (American Association of Cost
Engineers). Therefore, there may be uncertainties as to actual investment costs, and the
sensitivities of each project will determine whether or not such an exploration alternative can
be viable. In addition, the natural gas commercialization strategies may be particular to each
specific project, making estimates sensitive to several parameters that were not considered in
the present study.
It is valid to reinforce that since GTL technology has not yet been applied in offshore
environments, the application of FGTL in pre-salt area needs to be further studied, mostly due
to the more severe meteo-oceanographic conditions and the limitation of non-sheltered marine
areas to the design and the operability of an FGTL unit.

5. References

ANP, Agência Nacional do Petróleo, Gás Natural e Biocombustíveis, Preços De Referência do

Petróleo – março de 2019, 2019a.

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ANP, Agência Nacional do Petróleo, Gás Natural e Biocombustíveis, Preços Médios

Ponderados Semanais Praticados Pelos Produtores e Importadores de Derivados De
Petróleo, 2019b.
CASTELO BRANCO, D. A., Análise Técnica e Econômica da Aplicação da Tecnologia GTL
de Pequena Escala para a Monetização do Gás Natural Associado Remoto Offshore no
Brasil. Mastering Thesis, Rio de Janeiro, Brasil: COPPE/UFRJ, 2008.
BAXTER, I., Modular GTL as an Offshore Associated Gas Solution. In: Deep Offshore
Technology International, Amsterdam, Netherlands: dez, 2010.
BROWN, C., Gas-to-Liquid: A viable alternative to oil-derived transport fuels?, The Oxford
Institute for Energy Studies, 2010.
EIA, U.S. Energy Information Administration, Global gas-to-liquids growth is dominated by
two projects in South Africa and Uzbekistan, 2017.
EPE, Empresa de Pesquisa Energética, Plano Decenal de Expansão de Energia 2027. 2018a.
EPE, Empresa de Pesquisa Energética, Compilação de Correlações de Custos de Equipamentos
- Instalações Industriais de Gás Natural. 2018b.
EPE, Empresa de Pesquisa Energética, Informe - Custos de Gás Natural no Pré-Sal Brasileiro.
2019.
ETIM, B. M., Economic Viability of a Floating Gas-to-Liquids (GTL) Plant. Mastering Thesis
África do Sul: North-West University, 2007.
GLEBOVA, O., Gas to Liquids: Historical Development and Future Prospects. The Oxford
Institute for Energy Studies, 2013.
MARYLAND, Universidade de Maryland. Gas to Liquids (GTL) Plant Design and Proposal.
Final report of “Process Engineering Economics and Design II” subject, 2018.
SOLOMONS, I., Nigerian GTL Project starts production, ECIC. Export Credit Insurance Corp
News, 2014.
KIM, H. J.; CHOI, D. K.; AHN, S. I.;KWON, H.; LIM, H. W.; DENHOLM, D.; PARK, T.;
ZHANG, L., GTL FPSO – An Alternative Solution to Offshore Stranded Gas, Oil and Gas
Facilities, v. 03, n. 3, p. 41-51, 2014.