Natural Gas Monetization Options: A Global Economics Comparison

View Report Published September 2014

Natural gas (NG) has assumed an extremely important status worldwide as both a source of clean energy and a major feedstock for a number of chemicals. Its global value can be gauged by the economic, environmental, and sometimes political futures of countries being dependent on their possession or lack of NG for domestic and global demand. The economic and political stature that natural gas holds today has divided the world into groups with a variety of affiliated interests. Today, this gift from nature is an economic weapon as well as an economic necessity.

This report analyzes the economic aspects of natural gas. It presents a study on the economic and profitable utilization of natural gas by converting it into diverse value-added products. The purpose of the analysis is to present a picture of different gas conversion options to potential investors in the gas or chemicals production business, so that an investment decision can be made that achieves the highest rate of return. The four options evaluated in this report are:

  • Ammonia Production
  • Fuels Production (Fischer-Tropsch Process)
  • Liquefied Gas Production
  • Methanol Production

Technologies selected to represent the manufacturing of the above-mentioned products include: Uhde Dual-Pressure Process (ammonia); Sasol Slurry-Phase Distillate Process (naphtha and diesel); Triple Mixed-Refrigerant Process (LNG); and Johnson Matthey Combined Reforming Process (methanol). The current and future global availability of NG is also given from the perspective of overall world energy demand, and with regards to the supply and demand information of individual products.

Our analysis shows that among the four options, methanol production is currently the most lucrative option for investment in United States. The next-best gas conversion option is LNG production and its export to the Asian and European markets, given the projection that natural gas supply will continue to increase due to availability of more shale and tight gas. Local LNG prices will increase, however, from the exports. The analysis for LNG, whose local prices change seasonally in every region of the world, is presented in regards to exporting to West European or Asian countries.

The economic analyses presented in this report are based upon U.S. price/cost parameters. However, also included with the electronic version of this report is an Excel-based cost calculation module that can be used to calculate capital investment and production costs for these four gas-conversion options for other NG-abundant regions of the world. The module, called the iPEP Spectra, gives cost analysis based on the historical prices of raw materials/utilities. This tool can be used to do a comparative investment study of the above options in different parts of world. Cost estimates and a comparative picture of gross margins for four products are given for Australia, Canada, Russia and Saudi Arabia in the iPEP Spectra tool.

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