Tony Hayward, the former chief executive of BP, has been appointed chairman of CompactGTL, a fast-growing company at the forefront of efforts to turn natural gas into synthetic crude oil.
The appointment highlights the growing popularity of gas-to-liquids technology, particularly in the US where the shale boom has created an abundance of cheap natural gas.
Gas to liquids allows companies to exploit the new arbitrage opportunities opened by the gap between the high international price of oil and the much lower gas price, particularly in the US.
“The problem with GTL is it has been expensive, very big and complicated up until now – most people in the industry just roll their eyes at the mention of it,” Mr Hayward said. “But if you can put something out there that’s low cost, simple to deploy and can be built in a year or two rather than seven or 10, then there’ll be a lot of appetite.”
Royal Dutch Shell is the dominant force in the sector, having built the world’s largest gas-to-liquids plant – the $19bn Pearl GTL – in Qatar. Pearl is capable of producing 140,000 barrels of gas-to-liquids products a day from Qatar’s offshore North Field. Shell is planning to build a similar refinery in the US.
CompactGTL is at the other end of the scale. Its small, modular plants can harness unwanted gas that is a byproduct of oil extraction and which is often simply flared or burnt off into the atmosphere. The World Bank has estimated that 150bn cubic metres of gas is flared and vented annually – equivalent to 25 per cent of US gas consumption.
“If there was an opportunity to turn gas that’s flared today into oil, diesel or kerosene, people would jump at it,” Mr Hayward added.
CompactGTL has identified more than 800 oilfields globally – with 73bn barrels of reserves – where its solution can make a “significant economic impact”. Its technology can be incorporated into existing onshore and offshore oil operations, or deployed in remote locations where a large-scale conversion plant would be infeasible.
Like Shell, the company also plans to use the technology to turn cheap shale gas, and also “stranded” gas – in fields that are far away from existing infrastructure and too expensive to develop by conventional means – into petroleum products.
Petrobras, the Brazilian oil company, is piloting a small CompactGTL reactor for some of its offshore oil installations.
Nicholas Gay, CompactGTL’s chief executive, said Mr Hayward was joining as the company was reaching an inflection point, “as we come within reach of securing the first commercial contracts for modular GTL plants”.
Mr Hayward, who became CEO of BP in 2007, left the group at the height of the Deepwater Horizon crisis in 2010. The following year he became chief executive of Genel Energy, which has emerged as the largest oil producer in Iraqi Kurdistan
Other big names are also being drawn into the GTL sector. Roman Abramovich, the billionaire owner of Chelsea Football Club, recently invested £5m in another small UK-based GTL company, Oxford Catalysts.