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Oil companies seek cleaner fuel through gas alternative.

By Thomas Catan
FINANCIAL TIMES

A novel way to create an ultra-clean fuel for cars that uses natural gas instead of oil is on the verge of rapid growth, analysts say, driven by soaring oil prices and a thirst for alternative fuels.

Oil companies are investing billions of dollars in the nascent technology, called “gas-to-liquids” or GTL, which can be used to produce quality diesel and a range of other products normally derived from crude.

The process was developed in Nazi Germany and apartheid South Africa but in a few weeks will be tested on a commercial scale for the first time when the largest plant opens in Qatar.

The Oryx GTL plant, a joint venture between South Africa’s Sasol and Qatar Petroleum, is being watched closely by competitors and investors looking for the next big thing in energy.

Frank Harris, an analyst at Wood Mackenzie, the Scotland-based international oil consultancy, said: “For a variety of reasons, it would appear that the GTL industry is at an inflection point. If Oryx is successful, combined with some of the other projects in the works and this new paradigm for the oil price, it could be a huge catalyst for GTL.” Wood Mackenzie believes the next 10 years will see more than Dollars 40bn (Pounds 22.7bn) invested in GTL plants – with the majority going to the tiny Arab emirate of Qatar. It envisages about 600,000 barrels a day of GTL products being manufactured by 2015.

Alan Gelder, GTL analyst at Wood Mackenzie, said: “This would be a niche compared to the demand for oil products, but we would expect that there could be rapid growth thereafter.”

Other consultancies, such as Cambridge Energy Re-search Associates, see 1m b/d by 2015 of GTL production. The potential market is huge. Japan reportedly wants one-fifth of its transport fuel to come from GTL or biofuels by 2030.

Carmakers are also interested. Royal Dutch Shell is working with Toyota, Volkswagen and DaimlerChrysler to create vehicles that run on pure GTL diesel, which combines high power with extremely low emissions.

With the world’s third largest gas reserves and a stable leadership, Qatar is expected to attract about 70 per cent of the investment in the sector and aspires to be “the GTL capital of the world”. Shell and ExxonMobil plan to build plants in Qatar.

Nigeria, Colombia, Algeria, Egypt, Australia, Trinidad and Iran are all either building or considering GTL projects.

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