High oil prices can help the incorporation of Gas to Liquids (GTL) as a mainstream fuel, insiders said.

The fuel's evolution recently marked a historic chapter as Qatar Airways flew its first aircraft powered by GTL.

Robin Mills, a Dubai-based oil economist, said: "The process looks possible when oil prices are rising while gas prices remain low.

"GTL is a comparatively costly fuel and its success or failure as a preferred source depends on the oil prices. Besides being an aviation fuel, GTL is also a cleaner alternative to diesel. It is projected to play an important role in aviation and road transport."

Oil last traded at $80.50 a barrel and gas at $4.79 per million British thermal unit (mm/BTU) at the New York Mercantile Exchange.

So far, Qatar, Malaysia and South Africa are the three countries with GTL production capability.

Qatar promoted itself as the "GTL capital of the world" back in 2006, having for a short period of time even run buses on the fuel.

It financed a closely guarded research carried out by Rolls Royce to develop aviation engines that would be powered by GTL.

Finally, the GTL journey from London to Doha took place on an Airbus A340-600 aircraft using Rolls-Royce Trent 556 engines.

GTL technology uses a refining process to turn natural gas into liquid fuels such as low-sulphur diesel and naphtha, among other products. Supported by its huge gas reserves and rich coffers, Qatar has an edge over the other two GTL producers – Malaysia and South Africa.

"As to how prominent role GTL will play in the international furl markets depends almost entirely on Qatar.

"They don't have much oil but lots of gas. They have made huge investments both into GTL and LNG production. If the Qataris play their cards right, they should exploit the current opportunity of relatively high oil prices and low gas prices to promote GTL," said an Oryx GTL official involved in a project in Qatar.

GTL projects have received significant attention in Qatar over the past several years and Qatari Government had originally set a target of developing 400,000 barrels a day (bbl/d) of GTL capacity by 2012. However, project cancellations and delays since the North Field reserve assessment has substantially lowered this target.

In February 2007, ExxonMobil announced that it had cancelled its planned Palm GTL project due to rising costs. The Palm project was originally scheduled to produce 154,000 bbl/d of liquids for export, although estimated costs spiraled from $7 billion (Dh25.6bn) to $15bn, according to estimates. By 2012, Qatar is likely to have 177,000 bbl/d of GTL capacity at two facilities: the Oryx GTL plant and the Pearl GTL project, Energy Information Administration (EIA) the US Government's apex energy analysis agency said.

Oryx GTL is a joint-venture of QP (51 per cent) and Sasol-Chevron GTL (49 per cent), and has the capacity to produce 34,000 bbl/d of liquid fuels.

The plant was formally commissioned in June 2006, but technical problems prevented the consortium from loading the first export cargo until April 2007.

The plant said industry insiders is producing about 30,000 barrels of GTL daily, all of which is exported.

The Pearl plant will be 51 per cent owned by Qatar Petroleum, though Shell will act as the operator with a 49 per cent stake.

The facility is expected to use 1.6 Bcf/d of natural gas feedstock to produce 140,000 bbl/d of GTL products as well as 120,000 bbl/d of associated condensate and LPG. The Pearl GTL project will be developed in phases, with 70,000 bbl/d of GTL product capacity expected by 2010 and a second phase expected in 2011.

Originally estimated at $4bn, industry sources believe the Pearl facility will now cost between $12bn and $18bn, said the EIA.

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