The Rising Influence of Rising Affluence

[DewDiligence]

Shell Considers ‘Pearl-Like’ GTL Plant in Louisiana

[See #msg-64190519, #msg-61293785 and #msg-49175823 for background on the Pearl project.]

http://online.wsj.com/article/SB10001424052702304072004577323770856080102.html

›April 4, 2012, 6:27 p.m. ET
By RUSSELL GOLD

Royal Dutch Shell PLC is considering building a giant plant in Louisiana that would convert natural gas into diesel fuel, several people familiar with the company's plans said.

The plant, which could cost more than $10 billion, would be similar in size to Shell's Pearl gas-to-liquids facility in the Mideast nation of Qatar, the people said. Pearl, which went into operation last June, turns natural gas into enough diesel to fill more than 160,000 cars a day.

Shell declined to comment on its plans. The Anglo-Dutch company is expected to take up to two years to develop detailed engineering plans to determine if the plant is economically viable before submitting the project for approval by the company's board.

Shell's plans are the latest sign that companies are seeking new ways to exploit extensive natural-gas discoveries in the U.S. The boom in gas production from shale has sent natural-gas prices down 50% over the past year to slightly over $2 per million British thermal units, the lowest level in a decade. Diesel prices are near a record, up 4% from a year ago.

In September, South Africa's Sasol Ltd. said it was undertaking an 18-month feasibility study for a $10 billion gas-to-liquids facility adjacent to its existing chemical plant in Calcasieu Parish, La.

The technology to turn natural gas into a clean, low-sulfur diesel fuel was developed in Nazi Germany. But the high costs of building GTL plants generally have kept the technique from being commercially viable.

The first large-scale plants were built in Qatar because the nation has an abundance of low-cost natural gas. The cost of Shell's the plant in Qatar escalated to about $18 billion [the most expensive individual hydrocarbon project in history], but the company hopes the knowledge gained there will help keep costs in check in Louisiana, one of the people said. The diesel produced in the state could be exported to Europe and Latin America.

The U.S. last year was a net exporter of petroleum products, such as diesel, for the first time in 62 years. Shell considered locating the facility in Texas and Louisiana but opted for the latter because the state offered better incentives, a person familiar with the matter said.‹