Royal Dutch Shell Plc
spent $19 billion, triple the original estimate, to build the world’s
largest gas-to-liquids plant. Now, it’s pay-off time and the company says the
project may generate $6 billion a year.
Shell needs the plant, known as
Pearl
,
to bolster output, which fell for a seventh year in 2009 in part because rebel
violence hampered oil ventures in
Nigeria
.
Qatar
, the arid Gulf state that’s become the world’s biggest exporter of gas
on ships, may account for 10 percent of the company’s production after
Pearl
and a liquefied
natural gas project start deliveries next year.
Shell’s work in
Qatar
is “like creating a new
Nigeria
,”
Andrew Brown, the company’s executive vice president for the country, said in
an interview in the capital,
Doha
.
Pearl
will begin
processing gas toward the end of this year and start delivering fuel in early
2011, he said.
Gas-to-liquids technology, a
relatively expensive way to make diesel and jet fuel, makes more sense given
today’s disparity between natural gas and oil prices. Converted into barrels of
oil, gas is less than half the price of crude, which doubled to near $80 in the
last year. At full capacity, Shell said
Pearl
will churn out
140,000 barrels a day of liquid fuel and 120,000 barrels equivalent of ethane
gas and condensate, a by-product that’s like a light crude oil.
“GTL is a very expensive, energy
intensive process,” said Iain Anderson, an analyst at brokers Brewin Dolphin
Holdings Plc in
London
. “But the result you get is fantastic.”
Pearl
could be paid
off in five years,
Anderson
said.
Airlines, Cars
Since the fuel
Pearl
will produce is
purer than traditional crude-based products, Shell may be able to sell its
production at a premium. Pollutants such as sulfur are stripped out of the gas,
making it well-suited to green-minded airlines or clean diesel for cars.
Operating costs at
Pearl
will be about
$6 a barrel, Brown said, and the company can reclaim the cost of building the
plant through the production-sharing agreement it has with
Qatar
.
With crude at $70 a barrel,
Pearl
would generate
about $6 billion a year in profit for Shell and
Qatar
,
he said.
“GTL starts to make sense when
there is a spread between oil and gas prices,” said Ross Cassidy, an analyst at
Edinburgh-based Wood Mackenzie Consultants Ltd.
Ras Laffan
Pearl
’s webs of tanks and piping sprawl over a 4-square- kilometer
(1.5-square-mile) area at
Qatar
’s
Ras Laffan site
.
An estimated 51,000 workers, their necks draped in cloth to ward off the
blazing Gulf sun, weld joints, dig ditches and direct traffic with red and
green flags. The workers, mostly men, wear color-coded helmets indicating their
roles. White hats are formanagers, red for scaffolders, yellow for
pipefitters.
Shell project engineer Wiliam Keij
said that the start-up will last for months as unit after unit is fired up. At
the heart of
Pearl
will be twenty-four 1,200-metric-ton reactor vessels filled with pipes
where gas will be converted into paraffin through interaction with catalysts. The
paraffin then flows on into refinery-like units where it will be broken down
into kerosene for jet fuel, gasoil for diesel, naphtha for plastics and base
oils for lubricants.
The technology and energy required
to make gas-to-liquids work mean it has rarely been used to bring natural gas
resources to consumers. The 34,000-barrel-a-day Oryx GTL,
Qatar
’s
only operating gas-to-liquids plant, reached full power last year after hitting
snags following its start in 2006. Oryx is a venture between state-controlled
Qatar Petroleum and
South Africa
’s
Sasol Ltd.
Ironed Out Kinks
Shell said it has ironed out a lot
of the kinks of gas- to-liquids at a smaller plant it’s operated in
Malaysia
since 1993. Bintulu, which had early glitches, has been generating about $200
million a year in earnings. At 14,700 barrels a day, Bintulu is only about a
10th of the size of
Pearl
.
Alongside
Pearl
, Shell has a 30
percent stake in Qatargas 4, part of the world’s largest LNG complex, due to
start exports in 2011. With oil prices at $70 a barrel, the two projects should
generate more than $4 billion a year for Shell after revenue sharing with
Qatar
,
Brown said.
Last year, Shell had a
net income of $12.5 billion as
New York
oil futures averaged $62.09 a barrel. The company’s oil and gas production
averaged the equivalent of 3.15 million barrels a day, according to company
filings on Bloomberg.
In
Nigeria
,
Shell’s share of production for its onshore fields dropped to 150,000 barrels a
day after an oil spill shut a pipeline, Chief Financial Officer
Simon Henry said last month. At full capacity,
output from the fields is more than 350,000 barrels a day.
When
Pearl
and Qatargas 4
are both up and running they will add 350,000 barrels a day to Shell’s total
production.
(from
Bloomberg)