Gas-to-Gasoline Plants May Upset Regional Natural Gas Markets

oline, natural, plant, nacero, thi,
Gulf
  • Date: 24-Nov-2021
  • Source: Factset
  • Sector: Industrial
  • Country: Gulf
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Gas-to-Gasoline Plants May Upset Regional Natural Gas Markets

Last month, energy start-up Nacero announced plans to develop a $6 billion gas-to-gasoline plant in Newport Township, Pennsylvania, with the capacity to produce 100,000 bbl/d of gasoline. This is just one of three plants in development by Nacero, all of similar scale, which will be the first of their kind in the U.S. The firm has stated their plan to eventually build out nine gas-to-gasoline plants across the U.S. Though the technology of converting natural gas into liquid fuels is not new, rising oil prices and regional dynamics have renewed interest in developing gas-to-gasoline projects. Here we examine the fundamentals motivating Nacero’s Pennsylvania project and how it could provide an alternative solution to grow production out of a pipeline constrained area.

Pricing Factors

Despite natural gas prices hitting multi-year highs in 2021, the chart below illustrates that the value-add from processing gas into gasoline has increased. BTU modeled a 4.7-gallon net yield of gasoline from each Mcf of natural gas feedstock, bringing the cost of feedstock to below $1 per gallon of finished product. Accounting for this conversion, the increase in gasoline prices has outstripped the rise in natural gas over the last five years. So far in 2021, this has equated

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