After 10 painstaking years, planners working to build a $4 billion facility to turn natural gas into liquid fuel in Jefferson County have a full-scale model to show skeptics.
That’s a sprawling new gas-to-liquid plant in Qashqadaryo Province, Uzbekistan, that has been producing fuel for the past year and a half. And Hyundai, the same contractor on board for the Arkansas facility, built it.
GTL Americas President Leon Codron gave Arkansas Business an update on his project just after New Year’s Day. GTLA is spearheading the undertaking for investors including Energy Security Partners of Little Rock, the Arkansas Teacher Retirement System, Hanwha Group of Seoul and others.
Codron said the project, which could be the largest single industrial endeavor in Arkansas history, will be “almost a carbon copy in design” to the Uzbek plant, a $3.4 billion facility.
“I’m reluctant to give out numbers at the moment, because we’ve gone through a period of inflation and instability, but all that is coming back to normal,” Codron said. But he noted that using the Arkansas River to ship huge components to the building site north of Pine Bluff will be far simpler than transport was in landlocked Uzbekistan. All components, including chemical reactors weighing 3,000 tons each, had to be “cut up to fit on trucks,” he said. “So logistically, there was a major effort to accomplish this in Uzbekistan, and Hyundai did a special job to complete it on budget.”
Hyundai Engineering America will be the contractor on the Arkansas project, Codron said, along with a yet-unspecified U.S. partner. Though the COVID pandemic and its aftermath of supply chain disarray set back the timetable, the GTLA project is on track to begin site preparation this year. Project backers expect to complete negotiations with Hyundai for front-end engineering and design in the coming months. Final investment and construction of a dock on the Arkansas River are set for 2027, along with initial construction on the GTL facility.
The goal to start production is the last quarter of 2030.
‘God Bless’ the Skeptics
“A large-scale industrial project like this one just takes time,” he said. “If we had the absolutely fastest track, it would take us about seven years to get to construction. We’re in our 10th year, but allotting two years for COVID, we’re basically a year behind what would have been the fastest possible path.”
Skeptics have doubted the project for a decade, but Codron said the “vast majority” of Arkansans believe the plant is coming and are happy about its projected impact.
Construction would bring 2,500 jobs to economically depressed Jefferson County, and the plant would employ up to 250 permanent well-paid workers.
“There are some skeptics, and God bless them,” Codron said. “My answer to them is, ‘If you are right, we never would have got to where we are now. So ultimately you’ll become a convert.’”
The timing is right for the project, backers say, with international oil shipping at risk in the Red Sea. “Domestic energy projects like the GTLA project offer a clear security advantage for the United States,” Codron said. “Now, the ability to convert natural gas into diesel and jet fuels will further enhance that.”
Current economics also look promising, with crude oil trading at about $75 a barrel and natural gas selling for about $3.70 per million British thermal units. Low natural gas prices — by comparison were at nearly $14 per million BTU in 2005 — offer the GTLA project an attractive arbitrage opportunity.
“We’ve looked at low-gas-price scenarios and high-gas-price scenarios, and all are favorable for the project,” Codron said. Prices will spike during extreme cold weather, but GTLA’s supply agreements will adhere to a pricing formula, he said.
Four Things to Do
Four basic milestones remain on the path to construction, he said.
“The first is to complete the engineering, which will be done out of Korea and the United States, and that’s a 20-month process. Frankly it’s to get to a lump sum turnkey number for construction, and this is a vital piece for the financing.” Planners can then complete gas purchase deals to secure a feed stock for making liquid fuel and in turn make offtake deals to sell the diesel and naphtha the plant will produce.
“That is not a difficult exercise, because we have more demand than we have capacity, and we can only complete those near to the time of financing, so we have some definitive dates on deliveries and so forth,” Codron said.
The last step will be securing final due diligence and approval from the project’s four lead banks: ING Bank of Amsterdam; Intesa Sanpaolo of Italy; KFW of Frankfurt, Germany; and Mitsubishi UFJ Financial Group of Tokyo. “They are still of the opinion that this is a 70% debt, 30% equity project,” Codron said.
He expects the four milestones to come, “without any unforeseen interruptions,” within two years.
The Arkansas Department of Transportation has not set a date for building a road from Interstate 530 to the site, but grubbing, leveling and gravel placement are scheduled for the third quarter of this year.
The Economic Development Corp. of Jefferson County paid $2.8 million for 1,100 acres 15 miles north of Pine Bluff in 2016 and leased it for $10 a year for the project. The site has since grown to 1,800 acres.
The Jefferson County plant would be the eighth commercial gas-to-liquid fuel plant worldwide, and the first of its kind in the United States.
It will use a chemical process called Fischer-Tropsch conversion to turn out 1.7 million gallons of “ultra-clean transportation fuels per day and 150 megawatts of carbon-free steam-generated electricity,” the company said. Heat given off by the process of converting the natural gas to liquid fuel will drive the steam turbines to generate the power. The fuel is as clear as water and even harmless to drink, “though I wouldn’t; there’s no nutritional value,” ESP CEO Roger Williams said in a 2016 interview.
Unlike products refined from crude oil, fuels made in the GTL process contain lesser amounts of air pollutants like sulfur, benzene and toluene, and fewer heavy metals.
Burning GTL fuel emits carbon dioxide at half the rate of burning coal and 70% the rate of burning oil, proponents say.
The Financing Plan
Project leaders have obtained all major environmental permits and obtained a deal with Enable Gas Transmission of Houston to build compression facilities and a 25-mile pipeline to supply the plant. The Arkansas Public Service Commission approved the pipeline.
Codron said that project financing remains “Plan A” for getting the fuel plant built.
Project financing carves out assets for project builders to borrow against, according to Professor Tomas Jandik, a corporate finance professor at the University of Arkansas in Fayetteville.
“Cash flows from the project are dedicated to repay interest and then retire the debt,” Jandik said in a 2023 interview. “Projects of this kind of financing typically have very easily observable cash flows, and the assets cannot be hidden or moved somewhere else.”
The method has been key to power stations, oil facilities and even toll roads, Jandik said. “You can’t move or hide a toll road.”
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