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Shell in the race with Sasol for Lousiana largest project ever

Shell to replicate Pearl GTL with Lousiana GTL project

2B1st_Project_Smart_Explorer_Sales_Pursuit_ToolSince the South Africa company Sasol had announced last year to select its site in Lake Charles in Westlake of Calcasieu Parish in Louisiana, Shell opted also for the Lousiana Gulf Coast for its gas-to-liquids (GTL) project in USA.

At the CERAWeek, last year, Shell CEO Peter Voser had officialized its intention to replicate the Pearl GTL project from Qatar into the USA in order to benefit from the cheap feedstock provided by the shale gas development.

Shell_Louisiana_GTL_Project_MapThe profitability of the GTL business model results from a combination of parameters.

On the top of the list of these parameters we shall find the spread between crude oil price and the natural gas price.

The crude oil price will set the reference for the revenues of the GTL plant while the natural gas will condition the feedstock costs.

With a crude oil maintained by OPEC around $100 per barrel and a natural gas price at the Henry Hub fluctuating between $2 and $5 per million British Thermal Unit (btu) the spread between oil and gas price cannot hardly be better.

In addition all the analysis converge to indicate that this situation should last for many years in respect with the 100 years lifespan of the resources of natural gas in USA and the increasing challenges to develop new crude oil fields.

The other parameters to influence GTL projects in USA is the evolution of the demand for more efficient and cleaner transportation fuels.

Shell_GTL-Diesel_Powered_Audi_R10Even though the GTL process is very complex and requires a lot of energy, it delivers a sulfur free and aromatics free diesel with a much higher cetane index (above 74) compared with common fuels (around 40).

The consequence is that GTL fuels are much more energetic per liter, thus they reduce the consumption as illustrated by the successful Shell diesel powered Audi car in Le Mans endurance races in France.

In this context the Sasol GTL project and the Shell GTL project in the USA could contribute to meet the increasing demand of the domestic market for diesel transportation fuel while reducing the carbon dioxide and sulfur emissions.

Shell to reduce space to save costs on Louisiana GTL

With a GTL plant capacity of 96,000 barrels per day (b/d) Sasol is planning to proceed in two phases for the development of its Lake Charles project.

Originally budgeted for $8 billion capital expenditure, the Sasol Lake Charles GTL project actual estimations are closer to $11 or $14 billion. 

At that scale it will be the largest project ever to be built in Louisiana.

This Sasol Lake Charles GTL project could only be challenged by the Shell Louisiana GTL project in the same way as both companies competed in Qatar in the years 2000s.

Shell is planning for its Louisiana GTL project a facility of the same size as Pearl GTL in Qatar, meaning 140,000 b/d of liquids.

The Louisiana GTL plant would have two trains of 70,000 b/d each that should be built in phases.

Shell_Pearl_GTLIn Qatar, Pearl GTL  was due to cost $10 billion capital expenditure, but it ended up above $18 billion.

As the first plant being built at that scale, it accumulated all the learning lessons.

It also suffered from the spiral of the costs at that time initiated by all the other upstream and downstream projects launched in the same time in Qatar.

Shell is now expecting to take the benefits from these lessons learnt, from the current economical downturn to shave materials costs and from a second generation of catalysts that should improve the efficiency of the GTL process and allow a construction in much more compact way as in Qatar.

With these positive evolutions Shell is targeting to contain the capital expenditure for its Louisiana GTL project to $10 billion for a final investments decision to be made in 2014 or 2015.

For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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