THE WALL STREET JOURNAL: From Nikkei: Japan Oil Firms Getting Into Gas-to-Liquid Fuels: "Showa Shell has procured 2,000kl of the kerosene alternative from a Malaysian GTL plant of Royal Dutch/Shell Group.": Friday 30 December 2005

TOKYO -- Japanese oil companies are kicking off efforts to develop the gas-to-liquid (GTL) market in Japan, with some planning to jointly set up a domestic plant for the alternative fuel.

Showa Shell Sekiyu KK began sales this month of GTL-based fuel for kerosene heaters through a total of nine affiliated gas stations and propane gas sales firms in Kanagawa and Gumma prefectures. At more than 1,500 yen per 18 liters, the fuel is around 20% more expensive than kerosene. But with no impurities such as sulfur, GTL has less of an odor and burns more efficiently. The firm intends to sell the product in wider areas if it proves popular.

Showa Shell has procured 2,000kl of the kerosene alternative from a Malaysian GTL plant of Royal Dutch/Shell Group. In addition to sales for home use, the material will also be sold to ink and chemical producers.

Royal Dutch/Shell plans to build a GTL plant with a daily output capacity of more than 20,000kl in Qatar in 2009. And in 2010, Showa Shell intends to import 500,000kl of GTL, which is equivalent to roughly 2% of Japan's annual kerosene consumption.

Meanwhile, Nippon Oil Corp., Japan Petroleum Exploration Co., Inpex Corp., Cosmo Oil Co., Nippon Steel Corp. and Chiyoda Corp. plan to start building a trial GTL plant in Niigata Prefecture in fiscal 2006 with the government-owned Japan Oil, Gas and Metals National Corp.

This facility is slated to start operating around 2008 with a daily output capacity of 80kl using natural gas that Japan Petroleum Exploration produces from the Iwafuneoki gas field off the coast of Niigata. The total project cost is estimated at 36 billion yen.

The trial will be used to study a unique Japanese GTL production method that mixes natural gas and carbon dioxide gas at a ratio of about 8 to 2. The group hopes to perfect the technology by 2010 and build an overseas plant with a daily production capacity of 2,400kl.

Inpex is considering producing GTL at the Masela oil and gas field in Indonesia, to which the company has 100% of the development rights.