Alternative fuel company Primus Green Energy has just opened a gas-to-liquids demonstration plant in New Jersey. With natural gas prices trading well below oil prices, and US gas reserves abundant, Primus’ product could provide a cost-competitive alternative to petroleum-based fuels for the domestic market.

Here are some of the quick takeaways from a recent plant tour, which Breaking Energy attended:

• The demo plant is currently converting syngas into drop-in gasoline.
• The gasoline produced is high-octane, low-benzene and close to sulfur-free, thus already complying with proposed EPA Tier III standards for gasoline.
• Primus’ plant has the potential to produce gasoline, jet fuel and diesel.
• The plant can use either natural gas or syngas from any feedstock – from biomass to municipal solid waste – to convert to drop-in fuel.
• The plant design is modular and can be scaled up or down.
• The company envisions the technology being used to turn stranded and flared natural gas into usable fuel.
• The first commercial plant is to break ground in mid-2014. It will produce 28 million gallons per year and the second plant will produce 100 million USG/year.

The company’s largest funder is the renewable energy arm of Israel Corps. As in the US, this technology could allow Israel to harness their newly discovered natural gas resources and become more fuel-independent, in part by moving a share of the transportation fuel economy away from imported petroleum.

Natural gas prices’ deep discount to oil prices, and their relative stability, have allowed Primus to develop this technology on the basis of the price efficiency of their feedstock source. Ultimately they hope to be able to use flexible feedstock to produce various drop-in fuels competitively on a commercial scale.

Primus has estimated production costs per gallon of $1.65. Wholesale US gasoline prices have averaged more than $2.60/USG in each of the first seven months of this year, according to the Energy Information Administration.

Of course, any Primus cost advantage depends on the long-term stability of the oil-gas price differential.  Companies such as Chevron do not believe that gas prices will remain comparatively low enough for long enough to make large US GTL investments worthwhile, whereas South Africa’s Sasol appears to be moving ahead with plans for a GTL plant in Louisiana. Primus estimates that their commercial plant will cost around $ 200 million.