The promise of GTL fuel is alluring. Diesel engines tend to get about one-third better fuel economy thangasoline engines. The problem is that conventional diesel -- which is made from crude oil -- is much higher in pollutants that cause smog than is gasoline. By contrast, GTL diesel, because it comes from natural gas,one of the cleanest fossil fuels, has just a fraction of the pollutants found in crude oil. And current dieselengines can run on it without modification.
Despite such benefits, few cars use GTL diesel today. Only a tiny amount is manufactured right now, mostlyat small plants in Malaysia and South Africa. Few drivers have ever heard of GTL or are even aware of thepossibility of a cleaner diesel fuel.
Even the energy companies say they aren't yet sure exactly how they'll market it. They might try to sell itdirectly to consumers, or initially to refiners, who may blend it with diesel fuel they already manufacture."We'll put our product where it makes us the most money," says Exxon's Mr. Harms.
Western energy companies are taking the gamble because GTL plants in Qatar offer a rare opportunity: achance to make a big investment in a place where there are a lot of undeveloped resources. Despite runningup record profits, the oil giants are locked out of much of the Middle East, home to some 65% of the world'soil reserves. Most of the known oil reserves are in a handful of Persian Gulf countries -- Saudi Arabia, Iraq,Iran and Kuwait -- that are either unstable or closed to Western development.
Qatar, however, is far more open. In the capital's bustling City Centre mall, a four-story behemoth with anindoor ice-skating rink, women browse in chic shops for Western clothes, although many wear black chadorsin public. Women can vote, work and drive in Qatar, none of which is permitted in Saudi Arabia. Severalyears ago, the energy ministry even abandoned the Middle East's traditional Thursday-Friday weekend infavor of a Friday-Saturday break that kept it more in step with the rest of the globe. The government later followed suit.
Natural gas is more broadly dispersed around the world than oil. Much of it is in less-insular nations such asRussia, Qatar, Norway and Australia. So hopping into the gas-to-liquid business allows the Western energycompanies back in the game, in a big way.
Even before GTL, natural gas was chipping away at oil's position as the world's primary fuel. Natural gasprovides 23% of global energy today, up from 17% in 1970, thanks largely to a recent spree of buildingnatural-gas-fired electricity-power plants. If natural-gas use continues to grow, it could pass coal as theworld's second-most-used fuel by the end of the decade and catch oil as the top fuel by 2025, according toforecasters for Royal Dutch/Shell Group. Oil now accounts for 39% of global energy use.
The first GTL diesel fuel from Qatar is expected to hit the market later this year. By 2010, Qatar and itspartners plan to produce up to 750,000 barrels a day -- about 6% of current global consumption.
Diesel usage is expected to grow quickly in industrialized economies, although it isn't widespread in the U.S.While some trucks use the fuel, less than one percent of new cars in the U.S. run on diesel. By contrast,about half the new passenger cars in Europe run on conventional diesel.
Shell discovered the North Field, the world's biggest natural-gas field, off the coast of Qatar in 1971. Theproblem was that the gas was too far away from potential markets for a pipeline. In essence, the field waslike an enormous bank, but Qatar had no way of getting the money out.
In the mid-1990s, Qatar began building expensive facilities to chill natural gas into a liquid and ship it toWestern markets on giant thermos-like ships. The natural gas is chilled, shipped, and then reheated into gasform, mostly for industrial use or for electrical-power generation. GTL, on the other hand, transforms thenatural gas into automotive fuel.
The chemical process at the heart of modern GTL plants was developed in 1923 Germany. That countrywas rich in coal, but had little petroleum, so two scientists decided to figure out how to turn coal into a liquidfuel. They flooded coal with steam to turn it into a gas, and then ran it through pipes lined with cobalt tocreate a liquid fuel. The Nazi government subsidized the nascent industry as it geared up its war machine.Germany got as much as 15% of its motor fuel from coal-to-liquids plants, according to Texas A&MUniversity history professor Anthony Stranges.
After the end of the war, the U.S. government experimented with the German technology because it feareddomestic crude-oil supplies were running out. But gigantic discoveries of oil in the Middle East soon led to anabundance of global crude, and the experiments were dropped.
Interest in coal-to-liquids research dried up world-wide -- except in South Africa. Like Germany, South Africahas a lot of coal, but little crude oil. The state oil company acquired the rights from Germany to key parts of the technology and developed its own coal-to-liquids plants.
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