Shell has selected a potential site for a proposed world-scale gas-to-liquids (GTL) plant in the US state of Louisiana. If it goes ahead, it will convert natural gas into premium synthetic products including diesel, jet fuels, speciality waxes and feedstocks for lubricants, plastics and detergents.
The Gulf Coast GTL project would be one of the first commercial-scale GTL projects in North America – perhaps the first. However, it is unlikely to come on stream until into the 2020s, given that it would take around five years to construct from final investment decision (FID), which is still several years away.
In a joint statement with state governor Bobby Jindal, the company said it had chosen Ascension Parish, near Sorrento, as the location for the project. It is expected to cost upwards of $12.5 billion, the minimum spend required under the terms of an incentive package agreed with the state.
“Well in excess” of $12.5 billion: “We expect project costs to be well in excess of the minimum spend that was agreed upon with the State of Louisiana,” said executive vice-president Jorge Santos Silva, who directs integrated gas activities for Shell Upstream Americas. “Selecting a site is an important step that allows us to conduct more detailed planning, technical analysis and begin the permitting process.”
The project would almost certainly be based on the Shell Middle Distillate Synthesis (SMDS) process that Shell has developed and implemented at its Bintulu project in Malaysia, and more recently at the Pearl GTL project (pictured above) in Qatar.
The Pearl project, which produces 140,000 b/d of GTL products and 120,000 b/d of upstream liquids, cost close to $20 billion to construct. However, that cost includes the upstream production and the pipelines that carry gas to the onshore facilities. It is likely that the Gulf Coast GTL project would take its gas supply from the pipeline grid, so its economics would depend to a large extent on the trajectory of US natural gas prices.
Gas/oil price differential is critical: The project’s economics will also depend on the trajectory of oil prices, given that most of its products have prices linked in some way to crude oil. It is the wide differential between gas prices and oil prices that has persisted since the shale gas production boom got going in North America that has shifted the focus of GTL development from the Middle East to Canada and the US.
A final decision to build the proposed Gulf Coast project will be made after site evaluation and preliminary engineering studies are completed. The project is operated by Gulf Coast GTL LLC, an affiliate of Shell Oil Company and part of the Royal Dutch Shell group. Intriguingly, Shell has not announced the capacity of the proposed plant, but company executives have been quoted as saying that the latest version of the SMDS technology will be more efficient than that utilised at Pearl.
Under the terms of the incentive agreement with the state of Louisiana, the company would create 740 direct jobs, should the project be built. At peak building activity, Shell estimates the project would create up to 10,000 construction jobs.
According to an economic impact analysis commissioned by Louisiana Economic Development (LED) – the state’s economic development agency – the project’s 740 new direct jobs would result in around 3,900 new indirect jobs. The study was conducted by Louisiana State University (LSU), which further estimates the project would produce a total economic impact of $77.6 billion over the construction period and the first 15 years of operation.
Governor Jindal said: “For more than six decades, Shell has pursued oil exploration and production in both Louisiana and offshore in the Gulf of Mexico, employing thousands of our people with high-paying energy jobs. Today’s announcement is a historic new opportunity for Shell to potentially expand its manufacturing operations onshore in a world-class GTL facility in Ascension Parish on the Mississippi River.”
Incentive package: An estimated $32 million in road improvements associated with the proposed GTL project will address traffic generated by the construction and operation of the facility. The Louisiana Department of Transportation and Development will begin moving forward with these improvements this year.
Based on the status of its project evaluation, Shell would fund a number of new road projects, including new turning lanes and expansion of Louisiana Highway 22 and Louisiana Highway 70. These improvements currently are targeted for completion in the autumn of 2016.
The state of Louisiana has offered Shell an 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, along with various training, payroll and tax benefits.
(Photo courtesy of Shell)
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