A new old way to make diesel CNET News.com

RAS LAFFAN INDUSTRIAL CITY, Qatar--In this tiny emirate near the border with Iran, the world's largest oil companies are betting billions of dollars on an obscure method for making diesel fuel that stems from apartheid South Africa's aggressive efforts to wean its economy off imported oil.
Yellow school buses shuttle thousands of Indian and Pakistani workers from nearby labor camps each day to work in a giant meandering knot of pipes and turbines, showcased with a logo of an oryx, Qatar's antelope mascot.

No one is angling for oil here. In fact, rising oil prices have lifted the fortunes of a once-shunned technology that converts another fossil fuel, natural gas, into clean-burning diesel.
Even as geologists fiercely debate whether depleting oil fields can satiate intense demand for oil in the rising economies of Asia, the actions of the international energy industry may speak louder than words. Big oil is betting on once-derided unconventional energy sources, like this stranded natural gas in the Persian Gulf and remote tar deposits in Canada and Venezuela, to help meet surging demand for transportation fuel.
"It's time to take the genie out of the bottle," Abdullah bin Hamad al-Attiyah, Qatar's energy minister, said in an interview. "We want to be the capital of the world for this new age of fuels."
These different types of fuels may have clunky nicknames, like GTL and LNG. But they draw big money. Attiyah rattled off a roster of ventures with Exxon Mobil, Royal Dutch/Shell, Chevron and Sasol of South Africa to produce a new form of diesel from natural gas and said they were expected to invest more than $14 billion in capital over the next five to seven years.
This new diesel fuel is far cleaner than the diesel commonly used in passenger cars in Europe and heavy trucks in the United States. Diesel is usually made from the sulfur-laden parts of crude oil and traces its origins to the sturdy 19th-century engine invented by Rudolf Diesel.
Exxon Mobil and Qatar Petroleum are working together on one venture to produce cleaner diesel from natural gas that is expected to require $7 billion over the next several years. It would be the single largest investment in Exxon Mobil's history.

Qatar, a small peninsula nation off Saudi Arabia, is not alone in what may be the largest multination experiment with alternative fuels. Chevron is building another $3 billion complex in Nigeria to produce 34,000 barrels a day. Elsewhere, Syntroleum, based in Tulsa, Okla., is trying to advance similar ventures in Indonesia and Papua New Guinea, while in Algeria, companies including Shell, Statoil of Norway and Sasol of South Africa are vying for a project focused on that country's Tinhert gas field. Energy companies are also looking at gas-rich nations like Australia, Iran, Egypt and Trinidad and Tobago for other projects.
By 2015, overall production of this fuel may reach more than 1 million barrels a day, according to an estimate by Cambridge Energy Research Associates. That is roughly equivalent to Venezuela's current daily oil exports to the United States.
Qatar has attracted the largest projects thanks to its plentiful natural gas reserves and an aggressive investment strategy that builds on a longstanding cultivation of American and European energy companies. Only Russia and Iran are believed to have more natural gas than Qatar, a nation of 800,000 people--mostly foreign laborers--that is already positioned to soon become the world's largest exporter of liquefied natural gas.
The liquefied natural gas industry in Qatar, however, is much different from the wager on technology to convert gas to a liquid fuel. Liquefied natural gas is extremely complex to transport, requiring an elaborate system of cooling plants near gas deposits, double-hulled tankers and reheating facilities in the markets where the fuel is consumed. Liquefied natural gas is largely used to generate electricity.
The gas-to-liquid method, on the other hand, provides an alternative to oil as a transportation fuel. Gas-to-liquids essentially transforms natural gas into liquid diesel that can be transported and sold using existing tankers, refineries and gas stations.
The attraction of dieselDiesel is much more commonplace in Europe than in the United States, where consumers still think of it as a heavily polluting fuel used in big trucks and machinery. Two German scientists, Franz Fischer and Hans Tropsch, developed the process in the 1920s after discovering a way of converting coal into a liquid fuel.
Energy analysts say gas-to-liquid plants become competitive when oil prices climb above $30 to $35 a barrel, as they have during the last two years.
"We want to be the capital of the world for this new age of fuels."
--Abdullah bin Hamad al-Attiyah, Qatar's energy minister
Gas-to-liquid producers contend the fuel might attract a premium in nations looking for alternatives that reduce toxic diesel emissions. A report by the California Energy Commission recently recommended blending the cleaner diesel with existing fuel stocks to meet stringent fuel standards.
"One key aspect of the fuel is its low smog formation," said Andrew Brown, Shell's country manager in Qatar, who has imported a gas-to-liquid-powered Audi sedan to Doha to show how the fuel burns quietly and without the smell of early forms of diesel.
Transforming gas-to-liquids into an environmentally friendly fuel source is new, even if production methods have already gone through several incarnations. During World War II, Germany developed methods to convert coal into fuel for their army. And, apartheid leaders in South Africa adapted methods to convert coal into a transportation fuel to survive economic isolation.
The United States flirted with the method after the oil shocks of the 1970s, but eventually withdrew most funding of synthetic fuel research when oil prices fell. Then, breakthroughs enabled companies to use cleaner-burning natural gas instead of coal to produce a fuel that emits far fewer pollutants than diesel that is made from crude oil.
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