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Siluria Technologies Turns Natural Gas Into Gasoline in Hayward, Calif.

Siluria Technologies says it can produce large quantities of gasoline, diesel, jet fuel and chemicals at roughly $1 per gallon.

The clear liquid flowing from a collection of pipes and wires in a Hayward, Calif., industrial park smells just like gasoline, and for all practical purposes, it is.

But it wasn't made from crude oil. Instead, it came from natural gas, the fuel whose sudden abundance in America is reshaping the country's energy landscape.

Siluria Technologies says it can produce large quantities of gasoline, diesel, jet fuel and chemicals at a lower cost than traditional refineries and chemical plants. At today's natural gas prices, Siluria's technology could make gasoline at roughly $1 per gallon, according to the company.

The oil industry has taken notice. Siluria reported Wednesday that its latest, $30 million fundraising round was led by Saudi Aramco, the world's largest oil company.

For Aramco, the move may seem counterintuitive, since Siluria's technology could turn natural gas into a competitor for crude oil. But Siluria, headquartered in San Francisco, sees it as a natural fit.

"Their business isn't just oil," said Ed Dineen, Siluria's chief executive officer. "It's oil and gas and petrochemicals and power. And when they look across that spectrum, they have a strong interest in increasing the value of their gas. This will allow them to do that."

Aramco will join Siluria's board of directors and has put together a team studying ways to deploy the technology in Saudi Arabia. Founded in 2008, Siluria has now raised $96 million from such investors as Bright Capital, Kleiner Perkins Caufield & Byers and Lux Capital.

The company has also built a short but impressive roster of partners, including the Linde Group, a global company specializing in industrial gases and engineering. Braskem, a petrochemicals giant based in Brazil, is installing Siluria's system at one of its plants in La Porte, Texas, with operations expected to begin later this year.

Those alliances will help Siluria make the leap from tiny pilot plants, such as the one crafting small-batch gasoline in Hayward, to full production. And they reflect the company's approach. Siluria wants to partner with oil and chemical companies, not supplant them.

"What we've done with these partnerships, with Aramco and Braskem, is we've essentially brought the customers into the company," said Rahul Iyer, vice president of corporate development.

The ability to make liquid fuels from natural gas isn't new, dating back to the 1920s. But the most common way of doing it, a process known as Fischer-Tropsch, is neither cheap nor easy, requiring high heat and pressure to work. Royal Dutch Shell last year shelved plans for a $20 billion "gas-to-liquids" plant in Louisiana, in part due to the cost.

Siluria's process doesn't require intense pressure and heat. It uses a chemical catalyst to take methane molecules from natural gas and combine them into ethylene, a hydrocarbon widely used in the chemical industry. The ethylene can be sold as its own product, or it can be processed with other catalysts to produce liquid fuels. The catalysts stitch together carbon atoms from the ethylene to create gasoline or diesel or jet fuel.

"With a refinery, you're essentially boiling oil and separating it out," Iyer said. "We're building new molecules that weren't there before."

The controversial practice of hydraulic fracturing, or fracking, has flooded the United States with inexpensive natural gas, pried from shale formations beneath Pennsylvania, Ohio and West Virginia. Siluria's technology represents one way to take advantage of that surge.

But it can have other uses. Oil companies often burn off, or "flare," the natural gas that comes out of oil wells if they don't have a pipeline to carry the gas to market. Siluria's technology, deployed at oil fields, could create a valuable liquid commodity that would be easy to transport.

"If you've got stranded gas on the North Slope of Alaska or Kazakhstan, if you've got gas flaring in North Dakota or coming off of landfills, those are all opportunities for our technology," Dineen said.

Siluria's method for making fuel produces fewer greenhouse gas emissions than traditional refining, according to the company. There are no emissions of sulfur dioxide or mercury, either. And the carbon dioxide given off by Siluria's methane-to-ethylene process is pure enough to be sold as its own product.

But Siluria's version of gasoline still comes from fossil fuel. That limits its appeal as an alternative to oil, at least in the eyes of researchers concerned about global warming.

"My view is, it'll make some people some money, but it's not much of a solution, because you're still burning fuel and creating emissions," said Daniel Kammen, director of the Renewable and Appropriate Energy Laboratory at UC Berkeley. "It's a good business deal."

©2014 the San Francisco Chronicle