Shell ‘has not given up’ on gas-to-liquids projects

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The gas-to-liquids (GTL) industry has welcomed the news that Shell continues to seek opportunities to develop new GTL projects – despite having walked away from a proposed development in the US state of Louisiana. Speaking at a London conference this month, Guy de Kort, vice-president for GTL development, said: “By no means does that mean that in Shell we’ve given up on GTL.

“We continue our investment into technology development and product development . . . and are very active at the moment in pursuing new opportunities. I can’t tell you yet what those opportunities are but we’re certainly working hard on those. Also, given that we’ve stopped our Gulf Coast project, we have the time to do that – because if we’d continued with that project our plate would have been full.”

Shell announced in December last year that it had decided not to go ahead with a project in Louisiana, despite having selected a site and reached an agreement on development incentives with the state government. The news was seen as a blow by many in the GTL industry, given that Shell is a leader in GTL development, with two commercial-scale projects: the 14,700 barrel-day (b/d) Bintulu venture in Malaysia and the 140,000 b/d Pearl project in Qatar – by far the world’s largest GTL development to date.

Uncertainty on labour costs: Commenting on the reasons for that decision, de Kort told the conference: “The reason that we stopped the project was that we didn’t see enough upside and too high risk in the project itself. That was really related to the uncertainty on labour costs and productivity.

“What you see in very hot markets – we’ve seen it in Qatar and it’s also very visible in Australia – is that when there’s lots of projects and there’s a shortage of labour, then labour costs are going to go up. And if there’s a shortage of labour, there’s also a shortage of skills and therefore productivity of the labour that you have on the project is going to go down. And then you get rapid escalation of costs.

“That was a risk for the large project that we were looking at in the US, a $20 billion investment. That was a difficult decision to take on the returns that we had for the project.

“ It also has to be seen in the light of the overall portfolio for Shell. We not only pursue GTL projects but a lot of oil and gas projects, so a project always has to rank in comparison with others. We saw better opportunities for other projects within the strict capital discipline that we have.”

“Performing extremely well” Commenting on the company’s existing GTL projects in Malaysia and Qatar, de Kort said they were “performing extremely well”. Focusing on the Pearl project, which started up in 2011 – and which today accounts for a substantial percentage of Shell’s hydrocarbons production and cash flow – de Kort said:

“The first train started in 2011 and at the end of 2012 we had both trains in operation. Everything has been proven and is running at or above design capacity. Last year we were running at 90% [utilisation]. We’re now well above that. So we’re very happy with the performance of Pearl.”

Diagram showing Pearl Plant StatusAll the process units at the huge Pearl complex have been proven at or above design capacity and the complex is now running at “well above” 90% utilisation. (Source: Shell)

Asked by Gastech News to comment on how the Shell GTL technology was improving over time. de Kort replied:

“Efficiency is already a big step up from Bintulu to Pearl. Also, the design we had for the Gulf Coast project was another step up – a 20-25% reduction in carbon dioxide emissions compared with the Pearl design. What we have in the pipeline now is another step again . . . to improve overall efficiency.

“When it comes to carbon dioxide emissions, a big advantage of the GTL process is that the carbon dioxide is there at high concentrations and at high pressure. So if we have a carbon dioxide sink, either in carbon capture and storage (CCS) storage or enhanced oil recovery, we can very cost effectively extract that carbon dioxide and bring it somewhere else. So that's another opportunity to ultimately bring down the carbon dioxide emissions of GTL.”

by Alex Forbes