The Oil Drum

Last year I asked the president of Exxon Production (one of the subsidiaries) about the economics of LNG versus GTL.  He said that while they were funding a GTL project, he thought that the economics of LNG were superior to GTL.  Robert, any thoughts on this subject?

This is a timely subject for me.  I have been asked by the Dallas Morning News to write a 900 word rebuttal to a cornucopian essay by a writer for Reason Magazine (I'll have to start talking nice about at least some sectors of the MSM).  They are going to run the columns side by side, the pro and con arguments regarding Peak Oil.

As I have outlined before, fossil fuels can be viewed as a continuum, from natural gas, to natural gas liquids, to condensate, to light sweet crude, to heavy sour crude, to bitumen, to coal.  This is a progression from gas, to liquid to solid.  This is also a progression from cleanest, natural gas, to dirtiest, coal.  The world wants Liquid Transportation Fuels (LTF's)---principally gasoline, diesel and jet fuel.  LTF's can be obtained for the least expenditure of capital and energy from condensate and light sweet crude.  It only makes sense that light sweet has been the first to peak.  The industry is upgrading refineries as fast as they can to handle more heavy sour crude.  

But increasingly, we are looking at the endpoints for LTF's--GTL and CTL.   As has been discussed, these are vastly expensive projects, in terms of both capital and energy expenditures.   There is another factor.  Increasingly, we are going to be looking at a bidding war of sorts between companies that want to use natural gas and coal for heating and electricity generation and companies that want to use them for LTF's.   It seems to me that this is somewhat analogous to the battle between food producers and biofuel producers, for a finite supply of land.

In any case, by moving to the endpoints of the fossil fuel continuum, we are only accelerating our rate of extraction of our finite fossil fuel supply.