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Shell will not move forward with $12.5B US Gulf Coast GTL project

5 December 2013

Royal Dutch Shell plc will not move forward with the proposed 140,000 barrels per day Gulf Coast gas-to-liquids (GTL) project in Louisiana and will suspend any further work on the project, which was estimated to cost some $12.5 billion. (Earlier post.) Shell is the industry leader in large-scale GTL technology; the company said it has carefully evaluated a number of development options for GTL on the US Gulf Coast, using natural gas feedstocks.

Despite the ample supplies of natural gas in the area, Shell said it decided that GTL is not a viable option for it in North America at this time, due to the likely development cost of such a project, uncertainties on long-term oil and gas prices and differentials, and Shell’s strict capital discipline.

Shell built the first commercial GTL facility in Malaysia in 1993. In 2011, Shell began production at Pearl GTL in Qatar, a joint venture between Shell and Qatar Petroleum, the world’s largest GTL plant. Shell has built up substantial new options for integrated gas investment—including natural gas and GTL—particularly in Australia and North America in recent years. CEO Peter Voser commented “we are making tough choices here, focusing our efforts and capital on the most attractive opportunities in our world-wide portfolio, to add value for shareholders.

Shell thanked the Governor of Louisiana, his staff, Ascension Parish officials, regulators and the community for the opportunity to consider locating this project in Louisiana.

The State of Louisiana had offered Shell a competitive incentive package that would include a performance-based grant of $112 million to reimburse costs associated with necessary public road improvements, land acquisition and other infrastructure costs. Shell also would receive the services of the state workforce training program LED FastStart. In addition, the company would qualify for Louisiana’s new Competitive Projects Payroll Incentive (12% payroll rebate for each GTL job), as well as the Industrial Tax Exemption Program.

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Comments

If Shell can't make this work at N. American gas prices, it's not going to work anywhere outside maybe Qatar.

Short diesel, long CNG.

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