Gas to Diesel Fuel - Is There a Case for a Plant in Australia?

There is a lot of gas in Australia, and less it seems of liquid fuels suitable for diesel or petrol.  Could there be a case for gas to diesel conversion? Economics seem to be positive, particularly for remote areas.  Surprise suprise - that is where the gas is, as well as there being major needs for diesel for transport fuel for trucks and power generation, all of which is trucked in from refineries located a long way from where the fuel is used.

A recent article explores this in some detail -
 http://www.miningnewspremium.net/storyview.asp?storyid=9590380&sectionsource=s0 .

The major Australian engineering group GHD has been examining this idea in some more detail, and presented some results of a study focused on the WA Canning Basin recently.

“The miners are very reliant on diesel. Some use it for their trucks, some use it for power generation and it’s costing them a lot of money,” GHD studies manager Jonathon Beales said at the Australian Gas Technology conference in Perth  recently.

“Talking to a number of our clients, we’ve estimated the cost of transporting diesel from Port Hedland or Kwinana adds 25 per cent to the cost they have to pay for it.”

Add to the fact that 40-50% of diesel is currently imported and there’s currently a shortage of diesel – also in the order of 40-50% – and there’s a compelling case for miners to subtly encourage gas producers to consider Gas-To - Liquids [GTL] projects for their commercialisation plans.

GHD estimated a 55 tonne iron ore project could use up to 1 million litres of diesel per day.

As an industry, Beales reckoned, the iron ore sector used 11.1 billion litres of diesel in 2010.

Beales said synthetic diesel delivered from a GTL plant could cost miners a whopping 85% less than having to import their fuel, given the right circumstances.

But what’s in it for gas producers?

“In a number of discussions with companies we’ve had in that region, we’ve found that they are sitting on a great resource but are struggling to find a way to get it to market,” Beales said.

It seems to be a win-win for both industries and would increase Australia’s liquid fuels security to boot.

While the cost of developing a plant is high - possibly $1 billion - it would add to Australian local fuel supplies while offering some real cost savings along the west coast of Australia for mining and other resource projects including agricultural and pastoral developments.

Developing the GTL plant close to the gas seems sensible, but will it happen?  Do not hold your breath, yet!