In May of 2011, I read the first article about some shale gas being more valuable due to its specific mineralogy. Most LNG’s are sent to a cracker plant to be processed into ethane and used for the vast myriad of plastic products that our society seem unable to do without. There has been much competition and speculation for several years now regarding building just such a facility here in Appalachia.
However, some apparently think the mineral content and DNA of our LNG’s may be more valuable being refined into jet fuel or diesel, which, along with proximity to pipelines, refineries, and to market, may put a premium on liquid production from the Utica here. That’s if you believe Baird Energy, a Vancouver energy-development company, who has proposed to build a $3.5B refinery in Columbiana County on 200 acres, which they purport will be able to produce at a rate of 2.1 million gallons per day, specifically targeting jet and diesel fuel. They had previously planned a coal-generated facility requiring $6.9 billion and 450 acres which would have not only produced less, at a much higher cost, but with 75% more carbon dioxide emissions. Utica gas designated for ethane will reportedly have access to every cracker plant currently in existence in America, when the proposed pipeline projects already mentioned are online by 2014.
Recent comments by University of West Virginia Professor Tim Carr seem to confirm the speculation proposed above. He offers that Gulfport’s categorization of condensate vs. NGL’s is unique. His interpretation is that whenever Gulfport announces well results, and spell out the amount of condensate being produced, the moniker is actually being used to refer to liquid natural gasoline (pentene), a product needing little refinement in order to be converted to vehicle-quality gasoline, diesel, or jet fuel. Short or high-quality pure crude, Carr cannot imagine a more valuable or lucrative product to see in one’s production mix.
More recently, Houston-based Velocys announced it had acquired Pinto Energy (also Houston-based) for a very specific purpose. Seems Velocys, with offices also in Columbus, is looking to get involved in Utica production and in an area some would find unlikely. With both BP and Halcon Resources throwing in the towel (at least for now) in Northern Ohio, it was interesting to see them announce Ashtabula County as the site for their development plans. Apparently they see it as the perfect location for a new high-tech but small-scale gas-to-liquids plants ultimately producing……you guessed it – jet fuel and diesel.
Pinto is a facility-development company, while Velocys is techno-driven with a strong focus on gas-to-liquid production. Their plans are to use the Fischer-Tropsch process to convert gas-to-liquids, making economical use of areas where gas is stranded, flared-off, or found to be in need of a market. It requires a reliable supply of fairly cheap gas in steady volume and is quite economical when gas prices are distressed, and less so when its market will sustain higher prices.
“There’s certainly a point at which gas prices get too high”, spokesperson Andrew Miller admits, but he seems confident they can secure long-term contracts at todays’ prices, which are reportedly quite profitable. Apparently many producers will roll the dice long-term with gas secured at today’s prices. It certainly looks attractive compared what they were getting when this play first began. A November 2013 report by New-York based Bernstein Research (an oil and gas investment analyst) says it may go so far as to be another energy revolution. Time will tell.
Velocys reportedly will spend $300 million to build and develop the plant, having already bought the 80 acre tract needed to construct the facility. They will reportedly produce about 2,800 barrels of diesel fuel each day, employing 30 employees full-time, once the facility is up and running.