The success of Royal Dutch Shell PLC's (RDSA.LN) new Pearl gas-to-liquids complex in Qatar will play a key part in determining the profitability of GTL as compared with liquid natural gas following the spike in Asian demand for LNG, Pearl GTL Managing Director Andy Brown said Tuesday.

"With the rebound of appetite for LNG in the East [we have to ask] will LNG or GTL give the highest netbacks? Proving Pearl will aid that," said Brown, who was addressing the World XTL industry summit here.

The plant, which Shell has developed in partnership with Qatar , will use chemical processes to convert cheap and abundant natural gas from the Middle Eastern country's North Field into high value transport fuels such as diesel, as well as lubricants and feedstocks.

However, since Shell decided to invest in Pearl in 2006, the margins received from delivering GTL products, which are more closely aligned to the oil price, have narrowed relative to LNG, demand for which has grown sharply in Asia , fuelled by energy needs in China and India and Japan 's increased purchasing to replace lost nuclear power capacity.

"We have to be competitive against other forms of energy," said Brown, adding that Shell Chief Executive Peter Voser has said he wants to see how Pearl performs first before making further GTL investment decisions.

Pearl , Shell's largest single project to date, will cost between $18 billion and $19 billion. The official start-up date has yet to be announced, but is expected to commence within weeks. The plant will be fully up and running by mid-2012, Brown said. When running at full capacity Pearl will account for 10% of Shell Group production, he said.

At full capacity, the integrated plant will process 320,000 barrels of oil equivalent a day of gas from an offshore gas field into 120,000 barrels a day of condensate and natural gas liquids and 140,000 barrels a day of middle distillates, naphtha and base oil, according to Shell's website.

With cheap natural gas becoming increasingly abundant, Brown said Shell wouldn't rule out expanding its GTL program under the right circumstances. "There are opportunities around the world where you could take advantage of low price gas [and] transform it into high quality fuel products," he said, declining to give specific examples.

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