Downstream solutions offer new opportunities for upstream developments

Natural gas has typically been a domestic product. Due to its gaseous state, natural gas is usually transported by pipeline, which limits the reach of the production in comparison to crude or other liquids.

Billion-dollar pipelines have been built to transport natural gas resources in the Caspian, Middle East and Russia to hungry markets nearby.

Liquefied Natural Gas

Enter: liquefied natural gas. LNG opened up myriad markets for stranded production or glutted natural gas markets. For decades, countries like Malaysia and Qatar have been transporting natural gas to under-served markets.

Up until very recently, the US was an LNG importer.

By combining horizontal drilling and hydraulic fracturing, prolific shale gas formations across North America have dramatically ramped up production in the US. Not only do US markets not require LNG imports, the country now has too much natural gas, causing the price to drop and some production to be shut-in.

Nonetheless, markets in South America, Europe and Asia are still hungry for natural gas, and many operations worldwide are increasing LNG production to fill that growing need.

A number of companies in the US and Canada are also jumping for downstream solutions to upstream production overloads. Various companies are attempting to reverse LNG import facilities and pipelines to allow Gulf Coast operations to liquefy and export LNG, and there are projects on Canada's west coast to build new LNG liquefaction and export facilities to deliver Horn River Shale production to eager Asian markets.

Gas-To-Liquids

On the other hand, new technologies may help North American markets to better use existing domestic production, rather than export excess natural gas.

This week, South African petrochemical firm Sasol (NYSE:SSL) announced that the company is planning to build a gas-to-liquids (GTL) plant on Louisiana's Gulf Coast. Sasol is presently sturying the feasibility of the downstream project, which would convert natural gas to transportation fuels.

Using a proprietary Sasol technology successfully deployed in other GTL facilities, the Louisiana GTL plant would create GTL transportation fuel that is cleaner-burning than conventional diesel and does not require modifications to be used in existing vehicles and fuel delivery infrastructure.

The GTL solution would offer a new market for area shale production and could possibly offset some crude oil imports.


Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.