Will Shell Build Another Gas-to-Liquids Plant?http://www.fool.com/investing/general/2013/07/25/will-shell-build-another-gas-to-liquids-plant.aspx Arjun Sreekumar
July 25, 2013
With the surge in natural gas production in the U.S. and other countries around the world, companies are constantly finding new ways to put the cleaner-burning fuel to work. Some U.S.-based firms, for instance, are looking to export gas in liquefied form, known as LNG, to countries that don't have a free trade agreement with the U.S.
Thus far, however, only two LNG export ventures have been approved by U.S. lawmakers: Cheniere Energy's (NYSEMKT: LNG) Sabine Pass terminal, which was given the green light in 2011, and the Freeport LNG project, an $11 billion facility in Texas whose general partner, Freeport LNG-GP, is 50% owned by ConocoPhillips (NYSE: COP), which was approved earlier this year.
Meanwhile, a select few other companies are thinking about using natural gas in a very different way – by turning it into higher-value petroleum distillates, including diesel, naphtha, and lubricant base oils through a technology known as gas-to-liquids refining, or GTL. Royal Dutch Shell (NYSE: RDS-A) is one of the leaders in the use of this technology and is currently thinking about building another GTL plant on the U.S. Gulf Coast. Let's take a closer look.
Shell and GTL
Since Pearl came on stream in 2011, Shell has improved its proprietary GTL technology further still. If the company were to construct another GTL plant similar in size to Pearl, technological improvements and efficiency gains could deliver a 50% improvement in throughput volumes over Pearl, according to Shell's top GTL scientists.
Improvements in catalysts and synthesis reactors – the core process unit of a GTL plant – will also allow the company to use fewer reactors in future projects. In fact, Shell's head GTL process engineer, Arend Hoek, told Platts that it would be possible to achieve the same throughput levels as Pearl but with a third fewer reactors.
Matthias Bichsel, Shell's projects and technology director, reckons that cost savings from these and other process efficiencies and technological improvements should be "in the 15% range, perhaps a bit more".
Massive capex for Gulf Coast plant
That's because Shell would likely have to build much of the plant overseas, due to higher wages and a shortage of skilled workers in the U.S. Gulf region. According to Bichsel, parts of the plant w