Chevron’s Escravos GTL project finally gets off ground
The long-delayed gas-to-liquids (GTL) plant operated by Chevron Nigeria has finally achieved first production but that came nine years behind schedule.
The project was especially challenging due to its location in a swamp, requiring large quantities of sand landfill to support heavy reactors and other equipment at the site. These conditions will also limited opportunities to install modularised units that would have been built more cheaply off-site.
Due to such complexities, the Nigeria EGTL plant cost substantially more than a nearly-identical GTL plant at Qatar in terms of technology and capacity, which was inaugurated in 2006.
The initial estimated cost of the project was revised twice and reached $5.9 billion from an initial $1.7 billion. New estimates say the project was achieved with capital expenditure on it approaching $10 billion due to the delays and increases in costs.
These costs include gas gathering lines built to link the plant to gas feed, in addition to new gas processing facilities to strip condensates and LPG for separate export. However, the EGTL plant is designed to tolerate rich gas if the processing plants go down for any reason.
A pre-feasibility study of Escravos GTL was conducted in April 1998, followed by an engineering feasibility study. The Front-End Engineering and Design (FEED) was completed in 2002. At the same year, agreements between Sasol, Chevron and Nigerian National Corporation were signed. The construction contract was awarded in April 2005 to a consortium of JGC, KBR and Snamprogetti.
With the commencement of EGTL, Nigeria has joined a small group of nations including Qatar, South Africa, Malaysia and Australia that operate hi-tech Gas to Liquid (GTL) plants. The plant would allow Nigeria to perform a leading role in an advanced sector of the energy and fuel market.
“We recently achieved a major milestone at our Escravos gas to liquids plant with the production of GTL diesel and naphtha. We anticipate continued ramp-up in first product lifting later this year,” said George Kirkland, Vice Chairman and Executive Vice President-Upstream and Gas, at Chevron Corp., during the company’s Q2 Earnings conference call.
The $9.5 billion Escravos project is a 33,000-barrel-per-day GTL project designed to process 325 million cubic feet per day of natural gas from the Escravos Gas Plant expansion with plans to expand the EGTL capacity to 120,000 barrels per day within 10 years.
The Escravos GTL project will produce diesel, kerosene, naphtha and LPG – with the diesel and kerosene providing the nation with premium transportation fuels: diesel for road vehicles and kerosene to produce jet fuel for aviation. The products are expected to offset some oil product imports.
The project was developed by Chevron Nigeria Limited (75 percent stake) and NNPC (15 percent) and Sasol (10 percent). Sasol’s contribution includes plant risk finance for 50 percent of Chevron’s GTL project cost, plus FT technology and catalyst technology with financial returns tied to future plant performance. Sasol will also realize monetary gains from its FT technology licenses and catalyst sales (following on its strategic cobalt slurry FT catalyst partnership with Engelhard) through its Sasol-Chevron global joint venture.
Implications for Nigeria
The Escravos GTL plant located virtually next door to Chevron’s oil terminal and gas plant site at Escravos, will draw upon Chevron’s associated gas fields (mostly offshore) in Nigeria. The EGTL two-train plant uses cobalt slurry-phase Fischer-Tropsch (FT) reactors to produce ultra-clean diesel and naphtha, while the adjacent Escravos gas Plant will process about 1,000 bpd of LPG produced by EGTL.
The Escravos GTL project will also produce kerosene and LPG – with the kerosene providing the nation with premium transportation fuel to produce jet fuel for aviation. The products are expected to offset some oil product imports. Nigeria spent N192 billion ($1.18 billion) to import refined petroleum products in the first quarter of 2014, according to data from the National Bureau of Statistics (NBS).
The GTL venture represents a tangible environmental benefit by eliminating gas flaring; it also will provide a major boost to GTL research and development.
Downside
If world crude oil prices crash to $ 10 or below, then the GTL risk becomes all financial, where it’s tougher to maintain GTL fixed cost hurdles than it is for oil refiners to swallow crude cost gyrations. Given that potential down-side experience, it is possible that the biggest payoff for Chevron and Sasol might not be short-term but rather, longer- term, where technology development and operating experience could greatly reduce both cost and risk on future GTL plants.
FRANK UZUEGBUNAM