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Royal Dutch Shell ramps up Qatari gas to diesel machine

Steel News - Published on Sat, 01 Sep 2012

A Qatari project that has been a drain on Royal Dutch Shell\'s capital since 2003 is on the verge of turning into a unique asset that will produce billions of dollars a year in cash for the next 25 years.

Shell shareholders in 2013 should see significant benefits from Pearl GTL, a gas to liquids fuel project which until now has been notorious for a development cost overrun to USD 18 billion to USD 19 billion from the original USD 5 billion and which is still late for its mid 2012 date for full production.

Shell said that both Pearl\'s trains have now operated at between 90% and 100% of design rates and even though maintenance issues have run into the third quarter and kept them from working together at full capacity, that moment now could be just around the corner.

Mr Peter Voser CEO of Royal Dutch Shell said that \"We are now starting to ramp it up to capacity levels again, and therefore we are on track to deliver the cash flow and production we are expecting from it.\"

On a coastal site the size of London\'s Hyde Park and fed by the world\'s biggest non associated gas field, Pearl, the largest GTL plant on the planet strips methane from wellhead gas and combines it with oxygen to produce diesel, natural gas liquids and ethane.

Mr Voser described Pearl last month as a one of a kind asset. Scaled up from Shell\'s Bintulu GTL plant in Malaysia, it has a lifetime of 25 years based on an estimated 3 billion barrels of oil equivalent of gas in the North Field that feeds it a reserve discovered by Shell in 1971.

Shell has paid all the development costs, which amount to around USD 6 a barrel on that 3 billion barrels of oil equivalent of gas. In return it gets gas supplies from the North Field plus an undisclosed share of the profits Pearl will make.

Shell has said that the project would generate USD 4 billion of free cash flow a year at full production in a market with crude oil prices, the main determinant of the price of diesel, at USD 70 per barrel.

Shell will say only that returns are in line with other integrated gas projects, but given that Brent crude now sells for over USD 110 per barrel while the gas going into Pearl is effectively free, it could clearly be a significant contributor to one of the world\'s biggest corporate capital spending budgets at some USD 30 billion this year alone.

Analysts said that crude prices would have to fall below USD 40 per barrel before the plant loses money. The Qatari government\'s decision to buy a stake in Shell, reported to be approaching 3% may be further evidence of Pearl\'s cash delivery potential.

And the project\'s high profile has done no harm to the career of Shell executive Andy Brown, who steered it towards completion from Qatar and then moved into one of the company\'s top jobs in The Hague earlier this year as head of international upstream.

Source - Reuters


Posted By : admin on Sat, 01 Sep 2012
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