Petrobras’ search for a compact GTL plant that fits on a FPSO might be at an end

BY KAY CASHMAN FOR GREENING OF OIL

Two gas-to-liquids plant developers will soon be testing competing modular GTL designs for Brazil’s largest oil company, government-controlled Petrobras. The GTL process results in an unrefined synthetic oil, or syncrude, that can be blended back in with a field’s mainstream oil.

If at least one of the two modular GTL plants proves successful—i.e. economically feasible—it could go a long way to reducing the amount of greenhouse gas emissions caused by the flaring of unwanted natural gas from remote oil fields.

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Petrobras’ interest in GTL stems in part from its deepwater Tupi oil discovery. Almost 300 kilometers, or 186 miles, off the coast of Rio de Janeiro, the Tupi pilot project is presently burning off natural gas as waste, while its oil is being delivered to shore by the Cidade de Sao Mateus, a floating production, storage and offloading, or FPSO, vessel.

The modular GTL plants could be key to keeping Petrobras’ 8 billion barrel oil field development plans on schedule, Iain Baxter, recently told MIT’s Technology Review. Baxter is CompactGTL’s general manager. Compact is one of the two modular plant developers.

“Extended well tests are at risk of being delayed if the GTL solutions or alternatives aren’t proven pretty soon. GTL is the simplest solution,” Baxter said.

Half of one percent of GHGs from flared gas

According to the World Bank’s Global Gas Flaring Reduction Partnership, large amounts of unwanted natural gas is flared, burned off into the atmosphere, each year at oil fields around the world, most of them remote and/or in deepwater, where the cost of getting the natural gas to market by pipeline is prohibitive. Disposing of the gas, which is worth a great deal less than oil, often makes the most economic sense, especially if re-injecting it will damage the reservoir or otherwise impair oil production.

The private-public partnership said flaring produces some 400 million tons of greenhouse gas each year, about one-half of 1 percent of total GHG emissions from fossil fuels.

The challenge of how to deal with the unwanted natural gas that can accompany oil to the surface in a production well is stalling development of several oil discoveries in remote regions, and making it difficult for oil companies to conduct suitably sized preliminary well tests at elephant oil fields such as Petrobras’ Tupi oil field, the largest discovery in the Americas since Mexico’s Cantarell in 1976.

Tupi’s pilot project, which was producing about 14,000 barrels of oil a day at the end of 2009, will ramp up to 100,000 barrels a day sometime this year, Petrobras Chief Executive Officer Jose Sergio Gabrielli said March 9. That means a lot more gas will be released into the atmosphere, a politically unsavory position for field operator and majority owner Petrobras.

Major oil companies and governments, the Global Gas Flaring Reduction Partnership says, are “working together to minimize this waste by jointly overcoming the barriers that inhibit more gas utilization.”

Petrobras is one of those companies, although Tupi’s gas reserves are reportedly substantial and therefore in themselves valuable, but not nearly as valuable as the field’s high grade crude, which is considered “sweet”, meaning its sulfur content is less than 0.5 percent.

That makes the oil at Tupi cheaper to refine than the heavy crude that dominates Brazilian output. Once Tupi is in full production, Petrobras will not need to export as much cheaper heavy crude nor will it have to continue to import more expensive light crude to feed its refineries, which can’t handle all the heavy oil the company currently produces.

A job for FPSOs

But Petrobras faces a bigger challenge at Tupi than just the field’s distance from shore and unwanted natural gas. At approximately 7 kilometers, or 4 miles, under the ocean surface, its depth and what lies between it and the surface is also a factor. The 7 kilometers is made up of about 2 kilometers of water, 3 kilometers of sand and rock, and 2 kilometers of salt.

Consequently, it will be difficult for Petrobras to get an accurate picture of what the reservoir looks like, a picture that is important in the proper placement of wells for efficient field production. So instead of drilling a group of test wells with jack-up drilling rigs or ships, the company is building a fleet of FPSOs that can operate production test wells for up to 18 months, as well as be used for long-term production.

FPSOs with shuttle tankers are considered to be a cost-effective means of collecting and transporting offshore oil where pipeline infrastructure is too costly or technologically not feasible to construct.

Petrobras has an extensive FPSO track record dating back to 1979 in Brazilian waters, where it currently has 18 units in operation. The company will be the first to use a FPSO facility in the U.S. Gulf of Mexico, at its deepwater Cascade and Chinook developments, which Petrobras says are too distant from the Gulf’s massive subsea pipeline system to warrant the expense of a separate oil line that would tie into the existing system in shallower waters.

One advantage of the technology being used by UK-based Compact and its competitor enables the smaller, modular GTL plants to be placed on offshore structures, where space is at a premium.

A race to be first?

The other GTL developer vying for Petrobas’ business is U.S.-based Velocys.

The first to secure a contract with Petrobras was Compact, in 2006. Petrobras paid $45 million for Compact’s pilot modular plant, which will produce 20 barrels per day of synthetic crude, or syncrude, from natural gas. Currently under construction, Compact says the plant will be tested at the Petrobras’ production site at Aracaju, Brazil before being moved to an offshore facility.

Under the terms of its development and license agreement with Petrobras, Compact has recently completed a conceptual engineering study for a 2,000 barrel-per-day commercial plant to be installed on a planned FPSO vessel, the Guanambi 1.

In February, Velocys said it signed a joint demonstration and testing agreement to build a 5 to 10 barrel-per-day pilot plant for Petrobras. Velocys’ GTL pilot plant, which will be tested at the Petrobras refinery in Fortaleza, Brazil, “will be operated for nine months, after its construction and delivery in early 2011 and the subsequent commissioning and testing periods. … Following successful demonstration, it is expected that the first commercial deployment of the GTL technology will be on an FPSO … to mitigate flaring of associated gas resulting from the development of offshore oil fields,” the company said in a Feb. 9 press release.

But in a mid-March email to Greening of Oil, a Velocys spokesman wrote, “as a point of clarification, we have not decided upon or announced any plans for the GTL pilot plant except its operation at Petrobras’ Fortaleza refinery.”

Unlike Compact’s deal, in which Petrobras covers all the costs, Velocys’ press release said the cost of the plant, “estimated at tens of millions of dollars,” will be covered by Velocys’ partners in the venture, Toyo Engineering and Modec, “while Petrobras will be responsible for the installation and operating costs of the demonstration plant.”

Compact’s reaction to the deal? Nothing direct, but in a March 15 press release the company said the results from 18 months of testing “all aspects” of its pilot plant in the United Kingdom “confirms expectations” that it will be the “first company to commercialize modular gas to liquid plant production.”

According to press reports, Petrobras is also studying plans to either liquefy or compress natural gas on FPSOs in the Tupi field, or to use the gas to generate electricity for field operation.

Editor’s note: Tupi was discovered in October 2006 by BG Group, a partner in the field. Recoverable oil is currently pegged at between 5 billion and 8 billion barrels.

Links of interest

World Bank’s Global Gas Flaring Reduction Partnership

CompactGTL

Velocys

MIT Technology Review: Turning gas flares into fuel

Contact Kay Cashman at publisher@greeningofoil.com