Shale Glut Becomes $2 Diesel Using Gas-to-Liquids Plants - Bloomberg
A Chesapeake Energy Corp.-backed company and Oxford Catalysts Group
Plc are planning U.S. factories to make diesel, gasoline and jet fuel
from gas, which fell to a decade-low price this year. Their goal is to
make motor fuels more cheaply and easily than oil-based products
produced at giant refineries, and all within two years.
U.S. gasoline prices have jumped more than 125 percent since the end
of 2008 as crude doubled to more than $100 a barrel. At the same time
hydraulic fracturing processes, or fracking, helped gas producers unlock
once inaccessible reserves in shale rock. That’s boosted output and
driven down prices, sparking interest in using the surplus energy to
fill fuel tanks.
While U.S. natural gas prices are currently about $3.50 per million
British thermal units, the futures curve shows prices rising to more
than $6 per mmBtu during the next 10 years. Every $1 increase in the
price of gas boosts the cost of producing a barrel of diesel by $9,
Oxford Catalysts said.
Oxford Catalysts can produce a barrel of premium diesel for $66, or
$1.57 a gallon, using gas at $4 per thousand standard cubic feet ($3.89
per mmBtu) at plants with a capacity of just 1,500 barrels a day. The
unprofitable technology developer said a plant that size can be built
for about $150 million and would last for 20 years.
It costs about $124 a barrel, or $2.95 a gallon, to make premium
diesel from oil, the company estimated. The U.S. average price for
diesel at the pump is about $4.12 a gallon.
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