Velocys eyes small-scale to reduce cost of Fischer-Tropsch

Al Greenwood

30-May-2014

Roy LipskiInterview story by Al Greenwood

HOUSTON (ICIS)–Velocys is developing a small-scale approach to Fischer-Tropsch technology in a move it expects will allow the company to develop much more affordable gas-to-liquids (GTL) plants that will be closer to where the feedstock is produced, the CEO said on Friday.

In Fischer-Tropsch (FT), a mixture of hydrogen and carbon monoxide, called synthesis gas (syngas), is used to produce synthetic crude, which is then used to produce fuel products.

In the past, such plants have been large, increasing the likelihood of cost increases and delays during construction, said Roy Lipski, CEO of Velocys.

Velocys’s FT units use novel catalysts and microchannels that allow them to produce material at similar costs to the larger plants, but at a much smaller scale, Lipski said.

Because of the smaller size of the units, Velocys can build them using a modular construction process, Lipski said. This allows the company to avoid the cost run-ups and delays that plague much larger projects.

“It allows you to break out of the conventional paradigm of assembling plants,” Lipski said. “You can build these GTL plants in a standardised, mass-produced modular fashion.”

He added, “You are reducing the risk of cost escalation and delays. That is one of the key differentiators of the small, modular approach and the big plants.”

Rising costs are already manifesting themselves in the US.

Shell has cancelled plans for a GTL plant in Louisiana because of costs. PetroLogistics has put plans for a second propane dehydrogenation (PDH) plant on hold.

In addition to lower costs, the smaller plants bring another advantage. Because of their size, it is easier to install them at the sites of isolated gas production.

Many times, natural gas is produced at sites far from pipelines.  

Such stranded gas has become more common in the US because several parts of the country have increased natural gas production faster than companies can build pipelines. This is especially prevalent in North Dakota, where companies are flaring the associated gas produced from oil wells.

“North America is a patchwork of stranded gas,” Lipski said.

By having access to this stranded gas, the Velocys FT units could obtain a cost advantage on feedstock.

In addition to stranded gas, plants using the FT units could also use methane from landfills and biomass, since both provide the carbon needed to produce syngas.

The next step for Velocys is to prove that commercial-scale version of its FT units will operate successfully.

Solena Fuels chose Velocys’s FT unit for a biomass-to-liquids plant it is building in the UK. The plant will supply 50,000 tonnes/year of jet fuel to British Airways, and production should start in 2017.

Pinto Energy is using the FT technology for a 2,800 bbl/day GTL plant it is building in Ohio. The plant will use natural gas from the Utica and Marcellus. Production could start in 2016.

Velocys is developing a GTL plant in Oklahoma City, Oklahoma under a joint venture it formed with Waste Management, NRG Energy and Ventech Engineers. The project would use gas from a landfill site.

Lipski said the Oklahoma plant could be the first among the three that could start operations.

It is critical for Velocys to prove its technology, even though FT is a decades-old chemical process and nearly all of the components of the Velocys units are well understood.

“The importance of the first commercial plants, I believe, is not about technology or risk,” Lipski said. “It’s about proving the concept, the business proposition, the idea of doing this at a smaller scale.”

If successful, Lipski expects conventional gas-to-liquids production will initially be most predominate use for the company’s FT units.

Longer term, Velocys could apply similar concepts to steam methane reformers (SMRs), which produce the syngas for the FT units.

Right now, the company is developing reformers that can be used in offshore GTL production, Lipski said. Onshore reformers would be the next step for the company.

Further ahead, Velocys could adapt its technology to reduce the size of other chemical processes.

This would go back to the roots of the company. Velocys was spun off from a US government laboratory that was miniaturising chemical plants so they could be used in outer space.

Lipski sees Velocys as part of a larger trend of what he calls distributive manufacturing.

Instead of being centralised in a few sites, manufacturing could be distributed among several locations, Lipski said.

This concept has already manifested itself in telecommunications, off-grid electrical generation and the Internet, Lipski said. The model lends itself to chemical production, since many of its feedstocks are gases, which are relatively difficult and expensive to transport.

Distributive manufacturing would reduce the logistical constraints of using these gases as feedstock.

“I’m really looking forward to the future,” he said. “This is going to play an important role in reshaping society.”

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