It’s been a rough couple of months for the oil industry, and natural gas has suffered right along with it. As warmer spring weather disperses throughout the country, final thaws chase out the peak season for natural gas consumption.
24/7 Wall St. reports natural gas futures dipped below the 52-week low of $2.58. As of last Thursday, natural gas prices reached as low as $2.52
According to a report the U.S. EIA released last week, natural gas storage levels have increased by 15 billion cubic feet since this time last year– almost an 80 percent increase, though still 10.5 percent below the five-year average.
This hefty stock stems in part from low gas prices. The expenses to bring natural gas, an inevitable byproduct of oil production, to a viable market often dash interest in whatever profits might be made selling gas at low prices.
Companies employ numerous methods for managing natural gas. As an alternative to burning off excess natural gas, or gas flaring, some fuel companies have elected to convert natural gas to liquid fuel.
The cost to convert gas to liquids can be disheartening. Royal Dutch Shell recently halted plans to build a gas-to-liquids plant in Louisiana after its price tag reached $20 billion. For projects of the Shell refinery’s caliber, its massive size might have been its undoing.
Robert Schuetzle, CEO of Sacremento-based Greyrock Energy, saw opportunity in more modest endeavors. Founded in 2006, Greyrock focuses on small-scale gas to liquids, also called dGTL, to convert gas to into liquids that can be used locally or marketed.
“Some of the players do this at really massive scale,” Schuetzle said. “Gas to liquids have been deployed for many decades, but most of the plants in the world are really large-scale refinery systems. Shell, as an example, has several overseas facilities. These facilities are 20 billion dollars plus and massive efforts to build and operate, so that’s a completely different scale that what Greyrock operates at, which is a small, distributed scale.”
Bigger not always better
Greyrock enables its customers to convert cheap natural gas into premium diesel fuels for vehicles. By operating on a smaller basis, Schuetzle said Greyrock offers customers a more cost-effective and geographically feasible way to capitalize on a resources that would otherwise go to waste.
“While very profitable facilities, those large-scale facilities don’t fit in to the shale gas geographies where we sell into,” said Schuetzle. “They really need much larger gas volumes to do those refinery-scale applications, and frankly there are only a few organizations in the world that can afford 20 billion dollar refineries.”
One design, multiple inputs
Greyrock’s technology uniquely offers its customers cost-cutting versatility through its commitment to feedstock flexibility. This means that customers can use a number of inputs such as natural gas, ethane, propane, butane, or mixes of feedstocks to yield the most cost-effective product.
“With one plant design, you can really use a variety of inputs,” Schuetzle said. “You can change those inputs over time without changing the system, and it gives you the best versatility to make the most profit off of the difference between the price of your input and the price of your output.”
This flexibility allows Greyrock to service customers with different needs in a variety of locations.
“Ethane is a good example in some of these liquid-rich regions,” Schuetzle said. “Ethane is actually a petrochemical feedstock, and today is only used in the Gulf Coast, so in order to get that ethane and other NGL’s like propane and butane to market, you really have to process the gas and then transport it down to the coast, which can be very expensive.”
New prospects for dGTL
Greyrock has its sights set on both Bakken and Niobrara Chalk shale regions for new gas-to-liquids projects. Earlier this year, the company announced its partnership with Nerd Gas/U.S. GTL, a Wyoming-based energy investment company that focuses on responsible hydrocarbons operations.
“(Nerd Gas) really has a vision for how gas-to-liquids can help the state of Wyoming to convert natural gas, which is far away from market,” Schuetzle said. “They have to transport a lot of their natural gas to Chicago and the Gulf Coast where it’s utilized because there’s not much local consumption in Wyoming. Diesel fuel usage, however is quite high in Wyoming. There’s a large mining industry, a lot of transportation, a lot of rail, so there’s a large demand for diesel and a limited demand for natural gas.”
Greyrock has also partnered with Expander Energy, who is deploying Greyrock’s gas-to-liquids plants in Canada. “The Expander team is finding opportunities in Canada with outstanding differentials between natural gas or NGL inputs and diesel price outputs.”