Why Shale Natural Gas Players Should Invest in GTL (GAS TO LIQUIDS)

By: Submissions

Maninder Singh Batra writes: Shale gas in the past few years , has emerged as a tough competitor to conventional natural gas due to the massive increase in spot natural gas prices and advancement in hydraulic fracturing technology . But lately,since 2009 , there has been a massive decline in the natural gas spot prices(Henry Hub) ,due to massive glut in the natural gas market .

Most Shale gas players cannot make profit and maintain  at rates below 5$/Mcf , as proven by Chesapeake CEO’s Statement :
“McClendon admitted on the company’s February earnings call that $5.00 per million BTU pricing on the New York Mercantile Exchange (NYMEX) equates to $3.50 gas at the wellhead, once differentials like gathering and compression costs are included in the cost calculus. “Even $3.50 gas at the wellhead does not create enough cash flow in the industry to maintain today’s drilling price — even for the best-managed shale plays,” he said.

Excluding takeaway-pipeline expenses (like gathering and compression costs), Chesapeake posted, on average, production and development costs of $3.47 per Mcfe, according to the company’s 2009 annual earnings report.”

And currently , as the natural gas price chart shows that the current prices are below 5$. The only reason why Shale Gas players had managed to earn profit in the first quarter of 2010 ,was due to hedging gains.

But , this cannot continue forever and ultimately ,the shale gas industry will suffer losses ,if the natural gas spot prices continue to remain this low . But , there are better alternatives ,like converting this natural gas into synthetic diesel and Gasoline , or even synthetic light crude using FT process to convert the gas into liquids. 

Considering that the crude oil prices are hovering around 72$ ,it will be very profitable to convert the gas into GTL Diesel, ATF , naphtha . also there are several new GTL technologies and small scale GTL plants coming up and these have conversion efficiencies and energy efficiencies much greater than conventional large scale GTL plants .

So, rather than just competing with natural gas , shale gas players should also invest in GTL .

By Maninder Singh Batra

maninder300@hotmail.com

© 2010 Copyright Maninder Singh Batra - All Rights Reserved

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