The Rising Influence of Rising Affluence

[DewDiligence]

Shell Sets Sights on NG-->Diesel Plant in US

[See #msg-74155911 and #msg-74177265 for related info. The discussion re location seems to have expanded to LA or TX rather than just LA.]

http://blogs.wsj.com/source/2012/11/01/shell-sets-sights-on-natural-gas-to-fuel-growth

›November 1, 2012, 4:07 PM GMT
By Selina Williams

As weak U.S. gas prices drag down its earnings, Royal Dutch Shell is planning to bolster its profits by converting natural gas into road fuels like diesel, which it can sell at much higher prices.

Many energy companies are seeking to capitalize on low U.S. natural gas prices by exporting the fuel to Asia or Europe or burning it directly in specially converted trucks or buses. But only Shell can leverage its position as the world’s number one producer of gas-to-liquid fuels, which can fill the tank of any car, to tap an even more profitable opportunity in the domestic U.S. fuel market.

The move could be a smart one as it avoids the need for politically contentious export permits, but the process is still likely to be slow and complex. It’s also more capital intensive than investing in the liquefied natural gas infrastructure that is required for exports.

Witness the company’s flagship Pearl GTL project in Qatar [#msg- 61293785], where the facility chemically converts natural gas into premium diesel, lubricants and chemical feedstocks.

Although profitable, it cost around $18 billion and took five years to build. Pearl went into operation last year, but it’s taking Shell longer than expected to get the plant running at full capacity–that’s now expected at the end of this year.

However, Shell’s chief financial officer Simon Henry said in a conference call with reporters Thursday that the Anglo-Dutch energy giant has learned a lot through the experience at Pearl that will help to keep a lid on development costs in the next GTL plant, which it hopes to build in the U.S.

“It’s absolutely right that North America holds probably the best potential for the next development. We’re looking at potential sites on the U.S. Gulf coast where there is existing infrastructure and available gas supply,” he said.

The company is looking at sites in Louisiana and Texas as the possible location for a plant producing at least 70,000 barrels a day of liquids from natural gas. The diesel produced at the facility would be exported to Europe and high value markets in Asia.

But it’s still at a very early stage. The company is at least two years away from taking a final investment decision and then another four to five years away from production, Mr. Henry added.‹