Last year, Consol Energy Inc. and Praxair, a Connecticut-based maker of industrial gases, had an idea for what to do with the glut of gas coming out of the Marcellus Shale. They wanted to build a $2 billion plant that would convert gas and coal to a liquid fuel, one that could be used in your car or truck.
Cecil-based Consol is the region's largest coal producer and one of the major natural gas drillers in southwestern Pennsylvania, so it has a strong interest in getting more customers hooked on its fuels.
Ultimately, though, the economics didn't work -- not at current oil prices of about $100 per barrel.
The project would have had a positive rate of return, but not the 12 percent investors are looking for, said Dante Bonaquist, chief scientist and corporate fellow at Praxair. And it had risks, such as there are only four gas-to-liquids plants in the world.
So the idea remains on hold until something changes.
Tuesday, Mr. Bonaquist told businesses and trade groups at the Natural Gas Utilization Conference at the Omni William Penn hotel, Downtown, that gas-to-liquids is likely the most capital intensive way to deal with the gas oversupply problem menacing the oil and gas fields in the U.S.
The cheapest is to send that gas through pipelines to end users, provided there are enough of them.
Conference speakers were optimistic, if impatient, about utilization markets popping up to boost demand for natural gas, which will dip below supply levels in the U.S. by 2017, said Justin Carlson, senior manager of energy analytics at Bentek Energy LLC., based in Colorado. In Pennsylvania, natural gas production is already outpacing what we consume.
"We're not doing enough to support growth," Mr. Carlson said. "The market needs more users."
He was preaching to the choir. The conference had electric power producers, expected to be the largest consumers of natural gas in the future; companies that convert trucks to run on compressed or liquefied natural gas and those that build CNG and LNG fueling stations; and manufacturing advocates heralding the "renaissance" ushered in by cheap gas.
While the group gathered to figure out how to use the gas here, there were many echoes of exporting it abroad, where the market is indeed growing.
Nick Jones, energy adviser for corporate strategic planning at Exxon Mobil, said most of the demand for gas over next three decades will come from Asia, and the largest piece of it will be used for electricity generation there, followed by industrial and transportation markets.
"Where we may be somewhat demand constrained in North America, [it's] not so in the rest of the world," he said.
Anya Litvak: email@example.com or 412-263-1455