Industry and academia have been pursuing the conversion of natural gas to higher valued products. Potential process routes include the manufacture of olefins and chemical intermediates, gasoline, and distillate fuels. All indirect manufacturing routes start with a synthesis gas step, which requires expensive steam reforming or partial oxidation of the natural gas feed. The direct routes to conversion seek to convert natural gas directly into a higher valued product and to avoid this costly front-end step. Regardless of the approach, natural gas conversion processes, at their present state of development, typically are capital intensive and generate relatively low cash margins. Although there are exceptions, economic returns typically will be low unless process improvements can be made or unless higher product prices evolve in the future. Commercial technology already is in place for the production of three major liquid products from natural gas, which are gasoline, distillate, and methanol. Of these, methanol stands alone in total quantity of natural gas converted, number of process plants, and overall length of time in practice. Consequently, methanol manufacture can be viewed as a basis for the comparison of other, less mature, gas conversion processes. This paper examines the potential profitability of a selected group of possible natural gas conversion processes from the perspective of a manufacturing entity that has access to substantial low cost natural gas reserves, capital to invest, and no allegiance to any particular product. The analysis uses the revenues and costs of conventional methanol technology as a framework to evaluate the economics of the alternative technologies. Capital requirements and the potential to enhance cash margins are the primary focus of the analysis. The basis of the analysis is a world-scale conventional methanol plant that converts 3.2 Mm(3) per day (120 MMSCFD) of natural gas into 3510 metric tonnes (3869 short tons) per day of methanol. Capital and operating costs are for an arbitrary remote location where natural gas is available at US $0.47 per GJ (US $0.50 per MMBtu). Other costs include ocean freight to deliver the product to market at a US Gulf Coast location. Payout time, which is the ratio of the total capital investment to cash margin (revenue less total operating expenses), is the economic indicator for the analysis. Under these conditions, the payout time for the methanol plant is seven years. The payout time for the alternative natural gas conversion technologies is generally much higher, which indicates that they currently are not candidates for commercialization without consideration of special incentives. The analysis also includes an evaluation of the effects of process yields on the economics for two potential technologies, oxidative coupling to ethylene and direct conversion to methanol. This analysis suggests areas for research focus that might improve the profitability of natural gas conversion.
