Shell mulls third Pearl GTL train

30 May 2011

Oil major looking to shift production to from crude to gas

The UK/Dutch Shell Group is considering a third train for its Pearl gas-to-liquids (GTL) complex in Ras Laffan as production starts. The company is also on track to produce more gas than crude oil by 2012.

The international oil company (IOC) has invested between $18bn-$19bn in the Pearl GTL complex, a joint venture with Qatar Petroleum (QP), that is set to become the largest producer of GTL worldwide. The integrated project will source gas from the North Field and convert it into a range of products such as ethane, condensate, base oil, gas oil and naphtha.

Individual units of the first train are starting to come online. In April, Pearl made its first shipment of condensate. At the end of May, the first GTL diesel fuel was produced. Shell expects to make its first shipment of base oils by the end of June. Both trains of Qatar’s GTL project will be fully operational by the end of 2012.

In line with its strategy to continue to invest in unconventional production such as GTL and to make gas its primary hydrocarbon product over crude, Shell is giving thought to expanding the Pearl project, according to its chief executive officer.

“First I want to see the GTL in Pearl running. Once that is done, we can look at further options. One option is obviously that if the gas moratorium in Qatar is lifted one could think about a Train 3,” says Peter Voser, chief executive officer, Shell.

GTL or gas to chemicals plants in North America, where shale gas is being produced in abundance, is another option studied by the company.

Perceiving changing demand patterns, Shell is shifting its production from crude oil to natural gas. By 2012, natural gas production will have overtaken crude, with 52 per cent of production focusing on gas. Voser says this portion will increase in future.

“This is driven by our assumption that the gas demand will rise 50 per cent by 2030, growing much faster than the oil demand,” he says. The strongest demand growth is expected in Asia-Pacific, where rapid growth in China is being emulated by countries such as Indonesia, Taiwan and Thailand.

In anticipation of growing demand, Shell became a 30 per cent shareholder in the Qatargas 4 (QG4) integrated liquefied natural gas project. GQ4 began production in January, and will produce 7.8 million tonnes of LNG over a 25-year period.

Shell has also moved into the country’s downstream oil and gas sector by signing a memorandum of understanding (MoU) with QP for petrochemicals complex. The plant would become the world’s largest producer of mono ethylene glycol, with capacity of 1.5 million barrels a year. Negotiations over signing the heads of agreement are ongoing and are progressing well, according to Andy Brown, executive vice-president at Shell. In the meantime, Shell is undertaking preparatory work for the project.

The recent political unrest that has toppled regimes in Egypt and Tunisia and sparked a civil war in Libya has not affected Shell’s activities in the region much. It will also not deter the company from investing in the Middle East and North Africa in future, Voser says.

Shell had to evacuate staff and stop production in Egypt during the turmoil that toppled President Hosni Mubarak in February, but operations have since resumed. Exploration work in Libya remains on hold.

“We try to analyse what certain actions mean for us in the long term, then balance those risks against each other compared to other regions. I cannot see at this stage that this will stop us investing or delaying investments in the Middle East or Northern Africa,” says Voser.

The Pearl GTL complex is Shell’s largest single investment. The integrated project will produce 1.6 billion cubic feet of wellhead gas a day, which will be converted into 140,000 barrels a day (b/d) of GTL products and 120,000 b/d of upstream products.

The Pearl GTL project and QG4 will represent more than 10 per cent of Shell’s production, deployed capital and cashflow once both projects are fully on-stream.

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