Evaluation of Small-Scale Gas-to-Liquid Economic Feasibility to Mitigate North Dakota Flaring Issue

Abstract

The booming of shale gas production has affected the natural gas price in the United States (U.S). Natural gas price has plummeted due to the excessive capacity. On the other hand, the import of crude oil and its production of diesel, gasoline, and others are increasing. The problem lies in finding a practical, economical and efficient way of making natural gas marketable. A potential solution is Small-scale Gas-to-Liquids plants. Small-scale GTL can fulfill some of the petroleum products demand such as Gasoline, Ultra-low-sulfur diesel, and jet-fuel. Small-scale GTL plants especially can benefit countries where the gas production is higher than gas demand, yet these countries depend on imported oil. A Monte Carlo simulation approach is used to conduct sensitivity analysis on various parameters such as the feedstock/natural gas price, plant capacity, plant efficiency, capital expenditure (CAPEX), operational expenditure (OPEX), and products selling prices. The range for natural gas prices and gasoline prices are obtained from average historical data in the United States for the past five (10) years where the shale gas production is booming. The CAPEX is attained from previous GTL project plants before using the Power-Sizing model and literature. The annual OPEX is the percentage fraction of the CAPEX. The plant capacity was chosen based on the diseconomy factor estimated from previous GTL projects. Even with the premium quality of GTL products, the selling price for the products is equal to regular crude oil products. Economic metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), Cost-to-Profit (C/P) ratio and Payback Period were used to assess the success of GTL technology at each given business case. Results showed that NPV, IRR, C/P ratio and payback period are most affected by CAPEX, products selling price, OPEX, and capacity of the plant, in respected order. Based on these case scenarios and parameters, sensitivity analysis is conducted using Monte Carlo's simulation of 10,000 iterations the results for NPV, IRR, C/P ratio and payback period showed that the GTL project is profitable. The NPVs for the GTL plant in this study are positive for all case scenarios. It is expected that the outcome of this research would guide shale gas producers and private investors when considering GTL investment to monetize their assets in the United States and beyond.